Goldman Sachs Disney Buy Rating: $151 Target on 2026 Earnings

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Earnings Review

Revenue of $25.98 billion came in below Goldman Sachs estimates of $26.45 billion but beat Visible Alpha Consensus of $25.78 billion. Segment Operating Income of $4.60 billion missed our estimates of $4.82 billion but was in-line with consensus of $4.58 billion. Adjusted EPS of $1.63 beat estimates, driven by favorable below-the-line items including lower tax rate and interest expense.

Entertainment Segment

Entertainment revenue of $11.6 billion came in below Goldman Sachs estimates of $11.7 billion but beat consensus of $11.3 billion, with operating income of $1.10 billion below both Goldman Sachs and consensus estimates of $1.16 billion and $1.17 billion respectively.

Disney reported SVOD revenue of $5.3 billion with operating income of $450 million, representing 8.4% margins. The company reiterated its target of achieving a 10% SVOD operating margin for F2026, though F2Q26E guidance of $500 million places increased pressure on 2H26 to meet this target.

Sports Segment

Sports revenue of $4.9 billion was below Goldman Sachs estimates of $5.2 billion and consensus of $5.0 billion, with operating income of $191 million significantly below estimates. The temporary suspension of YouTube TV carriage had an adverse impact of approximately $110 million to segment operating income.

Programming and production costs increased 2% yoy due to contractual rate increases for college football and new WWE rights, partially offset by favorable timing of NBA and Big 12 rights costs. For F2Q26, management anticipates flat yoy revenue and a $100 million yoy decline in segment operating income.

Experiences Segment

Experiences revenue of $10.0 billion was in-line with both Goldman Sachs and consensus estimates, with operating income of $3.3 billion beating expectations. Domestic attendance grew 1% yoy, with per capita spending up 4% yoy. However, underlying attendance adjusted for Hurricane Milton comps declined 1% yoy.

Management guided to modest F2Q26E EBIT growth, falling short of expectations, likely impacted by the Disney Adventure delay, pre-launch and dry dock costs, and persistent international demand softness in domestic parks. Notably, international guests are less inclined to stay at Disney hotels, potentially explaining the divergence between domestic attendance and hotel booking trends.

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F2026 Guidance

Disney reiterated its F2026 guidance including double-digit yoy growth in adjusted EPS (excluding 53rd week), $19 billion in cash provided by operations, and doubling share repurchases target to $7 billion.

1. Entertainment segment: Double-digit yoy segment operating income growth weighted to F2H26, and operating margin of 10% for Entertainment DTC SVOD.
2. Sports segment: Low-single-digit yoy growth in segment operating income, despite temporary YouTube TV carriage headwinds.
3. Experiences segment: High-single-digit yoy growth in segment operating income weighted to F2H26, driven by two new cruise ship launches and the opening of World of Frozen at Disneyland Paris.

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Estimate Changes

Goldman Sachs reduced F2026/27/28 Segment Operating Income estimates by 3% on average, driven by lowered estimates for Entertainment operating income. The revised F2026 revenue estimate is $102.2 billion (down from $102.8 billion), with adjusted EPS of $6.76 (up from $6.72).

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Valuation & Investment Thesis

Goldman Sachs maintains a Buy rating on Walt Disney Co. with a 12-month price target of $151 (unchanged), implying 33.9% upside from current levels. The price target is based on a sum-of-the-parts valuation methodology with the following assumptions:

1. Parks and Experiences: 11x NTM+1Y EBITDA, reflecting strong brand strength and global demand for destination parks.
2. Consumer Products: 15x NTM+1Y EBITDA, supported by established licensing relationships.
3. Linear Networks: 4x NTM+1Y EBITDA, accounting for cord-cutting headwinds.
4. Content Sales and Licensing: 20x NTM+1Y EBITDA, driven by valuable IP portfolio.
5. Sports (ESPN): 6x NTM+1Y EBITDA, with upside from ESPN DTC flagship launch.
6. Direct-to-Consumer: Based on EV/subscriber methodology with implied EV/EBITDA of approximately 20x.

We believe Disney is a high quality EPS compounder supported by continued progression to scaled long-term DTC profitability, studio performance improvement, effective sports rights cost mitigation, and robust theme park growth enabled by a $60 billion investment over the next 10 years.

Key Investment Highlights

Disney shares are trading at less than 17x F2026 P/E with EPS growing at an 11% CAGR (F2025-2030E). Earnings should accelerate through F2026 as SVOD demonstrates operating leverage and parks momentum builds following the back-weighted nature of cruise ship launches and new attractions.

The company's established brand strength is supported by a long history of generating genre-defining film and television content via iconic characters and studio brands, operating industry-leading destination parks with global demand, and producing a global leading sport-focused entertainment brand.

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Key Risks

Key downside risks to the investment thesis include:

1. Intensified cord-cutting: Accelerated decline in linear network subscribers could pressure affiliate fee revenue beyond current projections.
2. Sports rights cost inflation: Escalating costs for live sports rights, particularly for NFL, NBA, and college football, could compress ESPN margins.
3. Streaming competition: Increased competitive intensity in the SVOD market could limit pricing power and subscriber growth.
4. Economic slowdown: Recession or consumer spending weakness could significantly impact theme park attendance and per capita spending.
5. Weak theatrical slate: Underperformance of major film releases could affect both box office revenue and downstream licensing opportunities.
6. Regulatory or policy changes: Unfavorable regulatory reforms or policy changes could impact operations or M&A optionality.
7. Interest rates and FX: Higher than expected interest rates could increase debt service costs, while adverse foreign exchange movements could pressure international segment profitability.

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Investment Conclusion

Disney represents a compelling investment opportunity at current valuation levels, trading at less than 17x F2026 P/E with a robust 11% EPS CAGR through F2030E. The F1Q26 results, while mixed at the segment level, reinforce our conviction in the company's earnings acceleration trajectory over the next 12-24 months.

The strategic transformation to streaming profitability is progressing on track, with SVOD margins of 8.4% in F1Q26 moving toward the 10% F2026 target. This represents a fundamental inflection point for the Entertainment segment, unlocking significant operating leverage as subscriber growth compounds with margin expansion. The combination of password sharing crackdowns, bundled offerings, and wholesale arrangements provides multiple levers to sustain this momentum.

Theme parks demonstrate underlying resilience despite near-term headwinds from international demand softness and pre-opening costs. The 5% yoy booking growth at Walt Disney World signals sustained consumer demand, while the $60 billion 10-year investment program positions Experiences for sustained high-single-digit operating income growth. The back-weighted nature of F2026 catalysts—including two cruise ship launches and World of Frozen opening—supports our confidence in 2H26 acceleration.

At $112.80, Disney shares offer 33.9% upside to our $151 price target, representing an attractive entry point for investors seeking exposure to a best-in-class media and entertainment franchise with multiple growth drivers. The recent pullback following F1Q26 results creates an opportunity to establish positions ahead of the anticipated earnings acceleration.

We reiterate our Buy rating on Walt Disney Co. The combination of SVOD operating leverage, parks momentum building through F2H26, and attractive valuation below 17x forward P/E creates a favorable risk-reward profile for long-term investors.

Key catalysts to monitor include F2Q26 results in May 2026, SVOD margin progression toward 10%, theme park attendance trends (particularly international visitors), theatrical slate performance, and ESPN DTC flagship launch timing. We expect the market to increasingly recognize Disney's earnings power as SVOD profitability becomes more evident and parks demonstrate sustained momentum.