Morgan Stanley: Disney cruise expansion supports earnings growth; price target raised to $133

How much profit can cruise expansion bring Disney?

Morgan Stanley expects Disney’s cruise business to generate approximately $5.1 billion in revenue in fiscal 2027, up from an estimated $4.4 billion in fiscal 2026; operating profit is forecast at approximately $1.5 billion, or approximately $1.7 billion on a normalized basis excluding pre-opening expenses.
The bank estimates that each ship can generate approximately $600 million to $700 million in revenue and more than $200 million in operating profit. Disney plans to expand its fleet from 6 ships in fiscal 2025 to 13 by the end of calendar year 2030, comprising 12 owned ships and 1 operated under license.
Expansion requires investment: management said the 10-year, $60 billion capital expenditure plan for the experiences business has been underway for approximately 4 years, with approximately $20 billion invested; each cruise ship requires approximately $1.5 billion. The company expects related projects to generate double-digit returns over their full life cycles.

The bank forecasts Disney cruise gross yield per available passenger cruise day of $699 in fiscal 2027, above Royal Caribbean’s $349 and Norwegian Cruise Line’s $379; the higher unit yield supports its profitability.
New ships are also expanding capacity: Destiny and Adventure had their first full quarter of operations in the third quarter of fiscal 2026, and together increased total cabin capacity by approximately 50% year over year.
Morgan Stanley believes operating profit disclosed in the cruise company’s UK filings may understate the business’s profitability because it includes private island-related payments, allocated management expenses and pre-opening costs; its normalized profit estimate adjusts for these items.

Using fiscal 2026 expenses of $83 billion as a base, Morgan Stanley estimates that cutting expenses by 4% and reinvesting 70% of the savings would yield approximately $1 billion in net savings. The ultimate profit contribution depends on the size of the cuts and the share reinvested.
The bank also lowered some operating expectations: amid a weaker environment in Asia, it expects international park attendance to decline 1.4% in fiscal 2027; streaming reinvestment also led it to lower its expectations for margin expansion in the subscription video business.
These reductions are roughly offset by another forecast: Morgan Stanley now expects the Super Bowl broadcast to generate a combined profit for ABC, ESPN and Disney+.

Morgan Stanley maintained its Overweight rating and raised its price target from $125 to $133, primarily because it has greater confidence in sustainable double-digit earnings-per-share growth. It raised its valuation multiple from 15 times to 16 times and applied it to its fiscal 2028 adjusted earnings-per-share forecast of $8.32.
The earnings forecasts themselves were lowered slightly: the bank cut its fiscal 2027 earnings-per-share forecast from $7.45 to $7.39, and trimmed its fiscal 2028 forecast from $8.33 to $8.32.
Fiscal 2027 results are expected to be weighted toward the first half: the timing of football events, the New Year weekend and Easter provides support, while the fourth quarter will face a difficult comparison with an extra week in the prior year.