Barclays Analysts Optimistic About Disney and Spotify

Investing.com — Barclays analysts expressed optimism about Disney and Spotify (NYSE:SPOT) ahead of the Q3 2024 earnings season, identifying both as top picks.

The bank indicated in a note Wednesday that it believes the current market expectations for Disney are too low, presenting a relative value opportunity. Meanwhile, Spotify is poised for continued revenue growth driven by several key catalysts.

Disney Insights

Barclays highlighted that Disney is likely to provide guidance for the next fiscal year, which could pleasantly surprise investors. Despite limited visibility due to factors such as local theme park attendance and an uncertain macro environment, Barclays believes expectations of flat or declining earnings per share (EPS) guidance are overly conservative.

Instead, they project that Disney will guide for low to mid-single-digit growth, partly fueled by the deconsolidation of its Indian business. A key focus will be on Disney’s ability to manage costs related to its ESPN direct-to-consumer product and NBA rights.

Spotify Growth Potential

Concerning Spotify, Barclays sees strong growth potential facilitated by several catalysts, including new pricing tiers, label negotiations, and a possible global price increase next year. The bank notes that recent price hikes in the U.S. and Canada will positively impact revenue, although growth next quarter might slow due to tougher year-over-year comparisons.

They stated that the company’s operating income may be affected by social costs associated with stock price movements. However, Spotify’s margins are expected to sequentially improve into Q4.

Conclusion

Both Disney and Spotify stocks are viewed as strong candidates for upside, particularly if Disney provides guidance above current expectations and Spotify manages to successfully execute its growth strategy, according to Barclays.