Walt Disney top pick at Morgan Stanley, experiences segment to drive growth

Investing.com -- Morgan Stanley said Walt Disney Company (NYSE:DIS) was its top pick, as it expects theme parks and cruise business to drive growth in the coming years, supported by scaled investments and improving margins.

The brokerage said Disney's experiences segment, which includes theme parks and cruises, is well-positioned to deliver operating income growth of 6-8% in fiscal 2025 and high-single-digit growth in fiscal 2026.

“We believe achieving this guidance is not fully priced into current DIS shares, as Disney's scaled investments at its Experiences segment offer durability in the growth outlook that warrants a healthy multiple to the broader market,” analyst wrote.

Expansion plans, including increasing cruise capacity and developing underutilized theme park land, are likely to yield high returns, Morgan Stanley (NYSE:MS) noted.

While risks remain, the firm said Disney sees accelerated growth in U.S. parks despite Universal’s Epic Universe theme park opening in May 2025. New cruise ships set to launch in 2025 and early 2026 will also bolster performance.

Cost pressures are expected to ease as Disney laps wage increases and sees potentially lower-than-expected startup expenses for its cruise operations, supporting margin improvement, the note added.