Walt Disney (DIS 3.01%) stock has rebounded 47% from its 52-week low, but Barclays analyst Kannan Venkateshwar sees even more upside as the company continues to improve its financial performance in the near term.
Venkateshwar upgraded the stock to overweight (buy) from equal weight (hold) with a $135 price target, or 17% above the company’s current share price of about $116. One lingering issue may continue to weigh on the stock in the near term, but the analyst believes better-than-expected earnings results should support the stock’s valuation.
The last cloud hanging over Disney
Disney is still facing a challenge from activist investors. Nelson Peltz’s Trian Group owns $3.5 billion of Disney stock and is attempting to win board seats through a proxy vote at Disney’s annual shareholder meeting on April 3.
Venkateshwar believes the uncertainty of the proxy vote has taken investors’ attention away from Disney’s solid earnings results last quarter. But an end to the proxy battle could shift more focus back to Disney’s fundamentals, and the stock is already responding to more optimistic earnings growth assumptions from Wall Street analysts.
Data by YCharts.
Why buy Disney stock
During the most recent earnings call in February, CEO Bob Iger said the company was on track to meet or exceed $7.5 billion in cost savings. Disney is in the process of improving profitability while investing more in its theme parks and other entertainment properties to grow the business over the next decade.
The consensus estimate currently has Disney reporting adjusted earnings of $1.06 for its next quarterly update in May, representing a 14% year-over-year increase. Meanwhile, the stock is still trading more than 40% off its previous high, and it could offer a lot more upside if the company remains on track with its growth initiatives.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
