Bank of America analyst Jessica Reif Ehrlich reiterated a Buy and a $191.00 per share price target on Walt Disney.

The analyst remains bullish on Disney’s Theme Park recovery as metrics show that the company is yet to experience strong demand despite achieving near-record results in FY1Q.

This prediction is backed by the following factors:

International visitors still represent a minimal % of total attendance,
Hotel room occupancy remains well below peak levels as all hotels have not been reopened yet,
Cruise ship capacity remains below pre-pandemic peaks, and
Parks are still operating below peak capacity levels.
All these factors are likely to provide additional tailwinds over the next 18-24 months.

The robust recovery, thus far, is currently being driven by a bounce back in domestic attendance, yield management, Genie+ and strong merchandise sales. DIS was opportunistic during the pandemic to implement transformational changes to the park to increase the longer term operating margin potential of the business. These include implementing a new park reservation system, mobile ordering, managing annual pass holder visits (which are typically lower revenue generators), integrating food and merchandise through storytelling (a large driver of per-cap increases) and new attractions, Reif Ehrlich said in a client note.

The analyst expects to see new investments in attractions, ships, locations to continue driving additional attendance.

As a result, Reif Ehrlich raised FY23/24 estimates for Parks, Experiences and Products. The analyst is also positive about other parts of Walt Disney’s business.

With the parks in strong recovery mode, content ramping for Disney+, peak Disney+ losses expected in FY22, and options on sports betting, NFTs, metaverse, etc., Disney is entering a period of very strong earnings growth (44% EPS CAGR ˜21-24E), the BofA analyst concluded.

By Senad Karaahmetovic

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