By Angela Palumbo
Wells Fargo has named Walt Disney its top media stock for 2026, in a bet that the company's streaming, theme park, and cruise businesses will see growth.
Analyst Steven Cahall moved Disney to the No. one slot in a research note Thursday, replacing Spotify Technology. He's confident in theme park growth -- despite competition and possible consumer spending pull backs -- and is optimistic that streaming margins and box-office performance will grow.
Shares of Disney were up 1% to $111.82 on Thursday.
Disney stock has risen 1.1% this year, underperforming the 15% rise of the S&P 500. The entertainment giant has faced several headwinds, including growing theme park competition with the opening of Universal's Epic Universe and a continued decline of the linear TV business.
Disney also reported lower-than-expected revenue for its fiscal fourth quarter on Nov. 13. Operating income for Disney's entertainment segment dropped 35% from the year-ago period to $691 million as both TV advertising and box-office sales fell.
Cahall thinks Disney stock can bounce back in the new year, and wrote that earnings have "significant upside potential."
In May, Comcast's Universal Studios opened its Epic Universe theme park in Orlando, Fla., just miles from Disney World. The close location of the new park intensified already existing competition. However, Cahall wrote in a research note Thursday that Disney World attendance was down "just 1% y/y [year-over-year]" in the fourth quarter.
Fourth-quarter operating income for the experiences division, which includes Disney's parks, rose 13% from the previous year to $1.89 billion.
The experiences segment could also get a boost from cruises, Cahall added. Disney has been working on expanding its presence at sea. It launched the Treasure ship last year, the newest Destiny ship in November, and the Adventure is expected to set sail in Asia in March.
Disney could also see continued growth of its direct-to-consumer business, which centers on its Disney+ streaming platform, as linear-TV business continues to decline.
Getting access to live events is something media companies have been looking to the next step of growth. Disney took a hit on Wednesday after the Oscars announced that it would stream on YouTube in 2029, after many years of calling Disney's ABC home. However, Disney did launch its new ESPN app in August as streaming companies compete to host different sporting events. Cahall wrote that ESPN "could meaningfully boost DIS's streaming share and total TV time."
Shares of Disney are also trading at 16.6 times earnings expected over the next 12 months. That's lower than their five-year average of 25.1 times. Streaming competitor Netflix is trading at 29.4 times forward earnings.
"In other words, DIS is demonstrably cheaper," Cahall wrote. That makes it an attractive opportunity, and less risky in the long term than a more expensive stock like Netflix.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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December 18, 2025 14:40 ET (19:40 GMT)
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