Bank of America Securities has reaffirmed its Buy recommendation on Walt Disney Co. and left its price objective at $140.00 following the company’s fiscal first-quarter financial release. At the time of the report Disney traded at $105.18 with a market capitalization of $201.38 billion. InvestingPro metrics cited in the results characterization label the stock as appearing undervalued, consistent with the analyst bullishness.
Financial results showed revenue growth of 5.2% to $26.0 billion, topping BofA’s estimate of $25.1 billion. Operating income fell 9.1% to $4.60 billion but remained slightly above the analyst projection of $4.54 billion. On an adjusted basis Disney reported earnings per share of $1.63, above the BofA forecast of $1.49.
Measured on an annual basis, Disney’s revenue stands at $94.42 billion and the company’s price to earnings ratio is reported at 16.39. Those metrics are presented alongside commentary that the valuation is notably low relative to Disney’s growth potential, according to the InvestingPro view cited with the results.
Segment-level performance in the quarter was uneven. The Entertainment division produced operating income of $1.10 billion. Sports reported operating income of $191 million. Experiences delivered operating income of $3.31 billion. At the consolidated level, free cash flow was a negative $2.28 billion, a shortfall attributed to taxes and the timing of working capital, and described as below expectations.
InvestingPro also rated Disney’s overall financial health as "GOOD," while highlighting a short-term liquidity mismatch: short-term obligations exceed liquid assets, with a current ratio of 0.71.
Management reiterated the company’s fiscal year 2026 objective of double-digit adjusted EPS growth and indicated that the improvement will be weighted toward the second half of the fiscal year. For the second quarter specifically, Disney expects Entertainment operating income to be comparable to the same period the prior year, Sports operating income to be $100 million below the prior year quarter, and modest year-over-year growth in Experiences.
Press reports dated February 1 referenced in analyst commentary suggest Josh D’Amaro is likely to be announced as Disney’s next chief executive officer. BofA said that a CEO announcement could remove an overhang on the stock given how important the Experiences segment is to consolidated earnings.
In related corporate reporting, Walt Disney Company’s first-quarter 2026 earnings release also beat Wall Street expectations on the metrics highlighted in those updates. The company posted an EPS of $1.63, higher than a cited forecast of $1.57, and revenue of $25.98 billion versus an anticipated $25.62 billion. Despite those beats, the stock fell in pre-market trading, signaling mixed investor reaction. The update noted there were no material mergers or acquisitions reported and that, following the earnings announcement, analyst firms had not released upgrades or downgrades on Disney’s stock.
These developments underscore a quarter that combined revenue and adjusted EPS strength with a decline in operating profit and a negative free cash flow figure, leaving investors and analysts to weigh near-term liquidity and segment-level headwinds against longer-term earnings growth expectations.
Key points
- Bank of America reaffirms Buy on Disney with a $140.00 price target after fiscal Q1 results that beat key estimates.
- Revenue rose 5.2% to $26.0 billion and adjusted EPS was $1.63; operating income fell 9.1% to $4.60 billion and free cash flow was negative $2.28 billion.
- Company reiterated fiscal 2026 guidance for double-digit adjusted EPS growth, expected to be weighted toward the second half; Q2 segment guidance shows mixed trends across Entertainment, Sports, and Experiences.
Risks and uncertainties
- Cash flow pressure: Negative free cash flow of $2.28 billion driven by taxes and working capital timing could constrain near-term flexibility in capital allocation and investing decisions. This affects the corporate finance and capital markets sectors.
- Liquidity mismatch: A current ratio of 0.71 indicates short-term obligations exceed liquid assets, raising near-term balance-sheet risk for the company and potentially affecting credit-sensitive operations.
- Segment drag in Sports: Guidance that Sports operating income for Q2 is expected to be $100 million below the prior year introduces an earnings headwind for media and live-event related revenue streams.