DIS: "Don't Just Fly, Soar" - Lifting DTC Cost Estimates

Research evidence excerpt

DIS: "Don't Just Fly, Soar" - Lifting DTC Cost Estimates

June 30, 2026

Investment Conclusion

While macro sensitive, facing secular declines in Linear Networks, and with concerns around long-term DTC revenue

growth, Disney remains an objectively good business that competes in growing markets with valuable IP. We believe

~25-40% of the Parks/Experiences OI growth to which Disney has guided through FY'26 comes from the addition

of 2 new cruise ships, which helps de-risk near-term numbers. Over the long-term, Disney's inorganic investment in

Parks / Experiences, which it put on pause over the last several years to fund its DTC expansion, will sustain HSD/LDD

Experiences OI compounding. For a highly cash generative business with valuable IP and durable demand growing

EPS at a double-digit rate over the coming years, we view a 7% earnings yield as too high. Our price target of $131 is

based on 16.5x FY'28 EPS of $8.33, discounted back to a 12-mo. price target. 16.5x is the NTM P/E of the equal weight

S&P500 (SPW), which DIS has historically traded +/- 10% relative to. As the market gains confidence in Disney's

Experiences capex driving appealing returns, we see upside to the 16.5x target NTM multiple.

Price Performance: Year to date, DIS is down -13.3%, underperforming the S&P 500 (+8.7%) and the Wolfe

Diversified Entertainment Index (-2.7%).

Exhibit 1 - DIS Price Performance vs. Peers and S&P Exhibit 2 - DIS 3-Yr. Relative Price Performance

Source: FactSet, Wolfe Research, LLC. Source: FactSet, Wolfe Research, LLC.

Valuation: Based on FactSet, DIS currently trades at 9.5x NTM EV/EBITDA and 13.5x NTM P/E. On both multiples,

DIS trades below the low-end of its historical averages and a discount to the S&P 500.

Exhibit 3 - Wolfe Diversified Ent.