Disney stock has 20% upside as Bob Iger's turnaround strategy enters its growth phase, BofA says

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

• Disney stock has 20% upside as Bob Iger's turnaround strategy enters its growth phase, according to Bank of America.
• The bank raised its price target on Disney to $145 from $130 per share.
• "Park performance remains robust and we project operating income to grow in the low-mid teens in 2Q," BofA said.

Disney stock has 20% upside potential as Bob Iger's turnaround strategy begins to enter its growth phase, according to a Monday note from Bank of America.

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

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

"Park performance remains robust and we project operating income to grow in the low-mid teens in F2Q," Ehrlich said.

Additionally, Disney should see a boom in net subscriber growth in its fiscal second quarter following its carriage deal with Charter. That deal was inked late last year and gave some Charter customers access to Disney+ at no additional cost.

Ehrlich expects Disney Plus to see 7.5 million new subscribers during the quarter. Disney's streaming operations should reach profitability in its fourth quarter following the company's targeted $7.5 billion in cost savings.

"This, coupled with what appears to be an improving film slate, drive a positive FCF trajectory as well as capital returns and position the company well to sustain their strong share performance YTD," Ehrlich said. 

Iger has been in a fierce battle with activist investor Nelson Peltz, who is vying for two board seats at Disney via a proxy fight. The proxy vote will take place on Wednesday at Disney's annual shareholder meeting.

Peltz has criticized Iger's track record at Disney, as well as the board's succession plan following Iger being briefly replaced by Bob Chapek in 2020. 

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

"Having spent the past year restructuring the company, he is now focused on multiple bullish drivers for the company including: 1) strong FCF generation with DIS on track to exceed their FY24 guidance of $8bn, 2) continued momentum in parks and experiences with F2Q y/y OI growth trending up low-to-mid teens, 3) an improving film slate and 4) increased confidence in DTC profitability by F4Q24," Ehrlich said. 

Ultimately, Disney has "a collection of best-in-class premiere assets" that should help drive forward growth in its stock price, Ehrlich concluded.