Here's how analysts say to trade Disney ahead of its earnings announcement

Published Wed, Aug 9 20232:46 PM EDTUpdated Wed, Aug 9 20233:51 PM EDT

Wall Street will be seeking insight from Disney executives on Wednesday as the entertainment giant navigates through turbulent times. Disney has been wrestling with a series of difficulties including inconsistent box office performance and the ongoing strike among Hollywood's actors and writers. The stock's performance has also been lackluster, up about 1% in 2023. The company will post fiscal third-quarter results after Wednesday's close. Analysts are forecasting earnings of 95 cents per share on revenue of $22.5 billion, according to Refinitiv. The company has managed to beat revenue consensus estimates for 12 out of the past 20 quarters, according to StreetAccount. Investors will seek management's outlook on the current quarter and the remainder of the year. Penn Entertainment announced Tuesday that it would partner with Disney's ESPN to rebrand and relaunch its sportsbook as ESPN Bet. DIS YTD mountain Disney shares' YTD performance Ahead of the company's quarterly release, several Wall Street analysts have lowered their performance forecasts. Goldman Sachs maintained its buy rating on the stock, but the firm also slightly lowered its price target by $2 to $128 to reflect lower estimates in a note written July 18. The new price target suggests shares could rally 45% from Tuesday's close. "We update our model for a somewhat muted C2Q23 core DTC operating performance driven by a seasonally weak content slate," said Goldman analyst Brett Feldman. Other hurdles he highlighted include the company's reshuffled theatrical slate for 2023 and 2024, as well as the planned closure of Disney World's Star Wars: Galactic Starcruiser hotel. UBS also maintained its buy rating on the stock in a July 10 note. Nonetheless, analyst John Hodulik acknowledged continued pressure in advertising and mixed performance in its Parks segments. Hodulik has a price target of $122 on shares, implying 38.4% upside from Tuesday's close. Evercore analyst Vijay Jayant brought down his price target on shares to $110 from $130 on July 23, anticipating that the company will "modestly underperform" consensus estimates. Weaker linear advertising, box office underperformance and increasing theme park depreciation and amortization are some of the headwinds the company faces, said Jayant. "Additionally, we believe there is risk to FY23 guidance of high-single digit segment [operating income] growth," the analyst continued. Morgan Stanley also named the decline in advertising as a core reason for reducing estimates. "Linear TV pressures and a maturing streaming market lead us to lower our DIS/WBD/FOXA/PARA estimates," said analyst Benjamin Swinburne in a July 26 report. He added that the Hollywood labor strikes "are a highly visible manifestation of the stress in the ecosystem and add additional uncertainty." He cut his price target to $105 from $110. Finally, Deutsche Bank analyst Bryan Kraft lowered his price target, citing lower advertising revenue and underperformance at the box office. His new price target is $120, down from $131. Kraft expects management to lower guidance for the fiscal year — but noted that this has already been expected by investors and is thus largely reflected in the stock price. "There are still a number of headwinds Disney needs to manage through, in addition to cyclical/secular advertising and secular affiliate pressures, as well as unanswered questions and uncertainties that could impact Disney's fundamental outlook, including the impact of the writers and actors strikes," Kraft wrote in a Tuesday note. — CNBC's Michael Bloom contributed to this report.