Barclays Highlights Disney and Spotify as Top Media Stock Picks Ahead of Earnings

Barclays analysts are showing optimism about Disney and Spotify ahead of the Q3 2024 earnings season, designating both as top picks.

In a recent commentary, the bank suggested that current market expectations for Disney are overly pessimistic, creating a relative value opportunity. They believe that Spotify is well-positioned for ongoing revenue growth due to several important developments.

For Disney, Barclays highlighted the company is likely to provide guidance for the next fiscal year that could surprise investors positively. While they recognize the limited visibility in terms of factors like local theme park attendance and the broader economic landscape, they argue that the expectations for flat or declining earnings per share (EPS) guidance are “overly conservative.” The analysts anticipate that Disney will project low to mid-single-digit growth, partly supported by the deconsolidation of its Indian business. Another focal point will be Disney’s management of costs relating to its ESPN direct-to-consumer service and NBA rights.

Turning to Spotify, Barclays sees significant growth potential driven by various catalysts, such as the introduction of new pricing tiers, ongoing label negotiations, and a possible global price increase next year. Recent price increases in the U.S. and Canada are expected to have a favorable impact on revenue, although growth in the upcoming quarter may moderate due to more challenging year-over-year comparisons. Furthermore, while the company’s operating income might be influenced by social costs linked to stock price fluctuations, overall, Spotify’s profit margins are anticipated to improve sequentially into Q4.

Both stocks are viewed as strong candidates for upside potential, especially if Disney offers guidance that exceeds current expectations and Spotify effectively continues its growth strategy.