By Angela Palumbo

The risk of a recession is "mostly priced in" for Walt Disney stock, creating an opportunity to buy at a discount, according to Wolfe Research.

Analyst Peter Supino upgraded shares of Disney to Outperform from Peer Perform on Monday. He gave the stock a price target of $112, which implies a 32% increase from its closing level of $84.81 on Friday.

"Squint across today's valley of recession risk & you'll see the Disney castle intact," Supino wrote in a research note.

Shares of Disney were off 1.6% on Monday to $83.49 while the broader stock market dropped. The S&P 500 was down 2.7% as investors' fears about how the trade way will affect the economy continued to intensify.

Disney hasn't been immune to the concerns. The stock has fallen 25% in 2025, its largest year-to-date decline since early in the pandemic. It had lost 30% year to date on April 21, 2020, according to Dow Jones Market Data.

Investors are worried because Disney is heavily exposed to consumer sentiment. If spending slows due to a recession or as tariffs lift prices, both the company's entertainment segment, which includes Disney+, and its experiences arm, which includes theme parks and cruises, could feel some pain.

Supino wrote in his note that Wall Street has already factored those risks into the share price. The stock is now trading at 14.3 times the per-share earnings expected over the next 12 months, less than half of the five-year average of 29.4 times.

Of course, Disney's problems go beyond the danger of a recession. On the list are some dull movies and news that China will be cutting imports of American films.

Still, Supino believes that the business will be able to withstand tough times. He said that in the entertainment business, Disney stands to benefit from cracking down on password sharing, as Netflix has done. " Netflix's conversion implies Disney+ can convert 15-20% of its password borrowers to subs and Hulu can convert 20-25%," Supino said.

"While core subscriber growth at Disney has slowed in recent years, we see ongoing tailwinds from linear TV's inexorable decline, streaming bundles, and password sharing," he wrote.

While the experiences business would suffer if consumers pull back spending on vacations. Supino believes that the company can bounce back with coming launches of new cruise ships and updates to theme parks.

"Over the next year, we expect investor focus to shift from recession risk and new competition in Orlando to cyclical recovery and returns on investments in new cruise ships," he wrote. "Through 2027, Parks & Experiences should power through near-term problems."

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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April 21, 2025 14:39 ET (18:39 GMT)

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