01:37 PM EDT, 03/27/2024 (MT Newswires) -- Walt Disney's ( DIS ) business model likely has several sources of potential earnings upside in the coming quarters, led by better results at its parks business, with additional help from the direct-to-consumers and content segments, according to UBS Securities.

These sources are expected to drive the media and entertainment giant's earnings estimates higher over the next several quarters, yielding a 25% three-year compound annual growth rate, UBS analysts John Hodulik, Batya Levi, and Christopher Schoell said in a note Wednesday.

The brokerage expects the parks segment's earnings before interest and taxes to grow by double-digit percentage annually in both the fiscal second quarter and full year amid strong US attendance. The company's spending plan is likely to drive high-single-digit or better EBIT growth in the business for "several years," the analysts said. "Despite the tougher comparisons, we expect the experiences segment to remain a high-growth and cash generative business for Disney ( DIS )," they said.

UBS sees the company's DTC segment becoming a "substantial" source of profits over the next few years. Subscriber growth, price hikes, and advertising ramp are expected to generate more than 20% three-year CAGR in segment sales. "The consolidation of Hulu in the US should also drive engagement and help streamline operations, boosting streaming margins," the trio wrote.

The brokerage expects Disney's ( DIS ) content segment to become profitable, with "incrementally higher" licensing revenue and improved box office with a new slate. "We expect Disney ( DIS ) to be more aggressive with content licensing without hurting the growth of streaming subscribers," the analysts said. "That said, the days when it was licensing its tentpole content to Netflix ( NFLX ) are likely over so the peaks are unlikely to be seen again."

The company's linear entertainment business is expected to continue to fall, though that will be "partly recaptured" within its sports segment and the new sports bundle, UBS wrote.

The firm increased its EPS outlook for Disney ( DIS ) by mid-single-digits from 2024 through 2026. It also raised its price target on the stock to $140 from $120, saying it continues to be "bullish" on the stock. Disney ( DIS ) shares have risen more than 30% since the start of 2024.

The upcoming shareholder vote amid activist pressure is expected to "add volatility" to Disney's ( DIS ) shares in the near term, the UBS analysts said. "The biggest risk in our view is potential management change were the activists to be successful in the bid for board seats," they wrote. "This could cause a downturn in the shares just as the benefits of (Disney ( DIS ) Chief Executive) Bob Iger's latest tenure are starting to take hold."

Price: 120.36, Change: +0.43, Percent Change: +0.36