Disney Stock Has 20% Upside as Bob Iger's Turnaround Strategy Enters Growth Leg, Bank of America Says

• Disney shares have 20% of upside as Bob Iger's turnaround strategy enters a growth phase, says Bank of America.

• The bank raised its price target for Disney from $130 to $145 per share.

• "Disneyland's industry merit remains strong and we expect to realize low to mid-teens growth in operating income in the second quarter.

Disney shares have 20% upside potential as Bob Iger's turnaround strategy begins to enter a growth phase, according to a report released Monday by Bank of America.

"Bob Iger now appears to be in command and control and is launching a growth offensive," said Bank of America analyst Jessica Reif Ehrlich.

The bank reiterated its Buy rating on Disney and raised its price target for the stock from $130 to $145 per share.

"The park industry remains strong, and we expect operating income to grow at a low to moderate pace in the second quarter," Ehrlich said.

Additionally, Disney is set to see a significant increase in net subscribers in the second fiscal quarter after signing a carriage agreement with Charter. The deal, signed late last year, gives some Charter subscribers free access to Disney+.

Ehrlich expects Disney Plus to add 7.5 million new subscribers this quarter. Disney's streaming business will be profitable in the fourth quarter as the company plans to save $7.5 billion in costs.

"This, coupled with what appears to be an improving film program, will drive an aggressive FCF trajectory and capitalization, 鈥竝ll keep the company's share price performance strong through the end of the year," said Ehrlich.

Iger has been in a heated battle with activist investor Nelson Peltz, who is vying for two of Disney's board seats through a proxy fight. Proxy voting will take place Wednesday at Disney's annual shareholders meeting.

Paltz criticized Iger's track record at Disney and Iger's board succession plan after he was briefly replaced by Bob Chapek in 2020.

But Ehrlich believes the turnaround strategy that Iger began when he returned to Disney's top ranks in November 2022 is just getting started.

"Having restructured the company over the past year, Iger is now focusing on a number of bullish micro-factors for the company, including, said Ehrlich, "1) strong FCF generation, with Disney on track to exceed its FY24 guidance of $8.0 billion; 2) continued momentum in the parks and gaming programs, with second quarter year-over-year OI growth trending in the low to mid-teens; 3) an improving film program; and 4) increased confidence in DTC's profitability through the fourth quarter of FY24.

At the end of the day, Disney has "an array of first-class premiere assets" that will help drive its stock price.

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