Needham Maintains Buy Rating on Disney (DIS) Despite Content Sales Weakness

The Walt Disney Company (NYSE:DIS) is one of the top 10 mega-cap stocks to buy according to hedge funds. On September 4, Needham analyst Laura Martin maintained her Buy rating on The Walt Disney Company (NYSE:DIS) with a price target of $125. At the time of Martin’s research note, the stock was trading at $116.80,  implying a modest 7% 12-month upside.

Laura Martin still says Disney is a “Buy,” even after lowering Disney’s operating income and EBITDA for the last quarter of fiscal 2025 in her model. That said, she expects earnings per share to keep growing.

One of the reasons she reduced the income estimates was due to the company’s recent guidance, particularly its comments about the Content, Sales & Licensing segment during the earnings call. But Martin didn’t lower her forecast for the full year’s revenue.

In the third quarter of Fiscal Year 2025, Disney’s Content Sales, Licensing & Other segment posted an operating loss of $21 million on $2.26 billion in revenue. That’s a big drop from the same time last year, when the segment brought in $254 million in operating income on $2.1 billion in revenue.

The dip came mostly from higher movie production costs, especially for Lilo & Stitch, the company said, and weaker box office results for films like Elio and Thunderbolts. That’s in contrast to last year, when Inside Out 2 had a strong run in theaters and helped boost the numbers.

Analysts expect the company’s EPS to grow to $6.48 per share in fiscal year 2026, which would represent a solid 10% growth from the current fiscal year. The stock is currently trading at a Forward P/E of  18.42, which is slightly cheaper than the sector median of 20.57x.

While we acknowledge the potential of DIS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 12 Best Tech Stocks to Buy According to Hedge Funds and 11 Best Stocks to Invest in for Long Term Growth 

Disclosure: None.