We're not ready to echo Goldman's call to buy Disney — here's why

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Disney picked up an endorsement from a top Wall Street firm — but Jim Cramer said the analysts' reasons to buy are not enough to drive the stock higher. Goldman Sachs initiated coverage of Disney with a buy rating and $125-per-share price target, implying more than 22% upside from where the stock closed Monday. The analysts wisely touted Disney's theme-park business as a source of growth in the years ahead and a competitive advantage in a transitioning media industry. However, Jim expressed concerns that the problems facing Disney's cable TV business — specifically, its flagship ESPN division — are keeping a lid on shares in the near term. Goldman's call is "important," Jim said Tuesday during the Investing Club's Morning Meeting. "I still think if you were to say that ESPN, that their numbers were up, that [there] were more subscribers, that stock goes to $120. Otherwise, forget it because you have to find a way to stop the decline [in traditional media]." The analysts said that given the U.S. media industry is experiencing heightened content competition and technology disruption, they prefer to invest in companies with "deep competitive moats that should provide better visibility into growth." In addition to recommending Disney, analysts started coverage of Fox and Comcast , the parent company of CNBC, with buy ratings. Disney is made up of three business segments: Entertainment, which hosts its streaming services like Disney+ and Hulu; Sports, which is made up of ESPN networks and its streaming companion ESPN+; and Experiences, which represents theme parks, cruises and consumer products. Experiences accounted for most of the company's profits in its fiscal 2023. Goldman said Disney's advantages include a content and broadcast rights portfolio that fortify its Entertainment and Sports segments, respectively. The firm sees Disney as the best-positioned rival to streaming leader Netflix and predicted steady progress on profitability ahead. New streaming options set to launch next year that include ESPN could help offset the revenue hit from cord-cutting, Goldman said. On the Entertainment side, Disney's $60 billion theme parks expansion should fuel growth outside of the crowded streaming landscape, Goldman told clients. While we welcome Goldman's positive multiyear outlook for key Disney businesses, it does not change the fact the stock has struggled to gain traction since Nelson Peltz's unsuccessful proxy fight ended in early April. Its May 7 earnings release sent the stock tumbling, erasing brief momentum in the days leading up to the report. The stock is down more than 12% since May 6, to around $102 a share Tuesday, though it remains roughly 13% year to date. We took profits in Disney around $122 a share and $114 a share on April 1 and April 15, respectively. In the short-term, we're honed in on streaming reaching profitability later this year and want further progress on cost-cutting efforts as part of CEO Bob Iger's turnaround plan. We're also encouraged by the recent box office success of "Inside Out 2." Even if it hasn't moved the stock needle yet, it's a step in the right direction for the film studio business. We currently have a 2 rating on Disney shares, meaning we're waiting for a pullback before buying more, and a price target of $130. In this market, Jim indicated he's wary of increasing the Club's stake in a company with a dragging unit, especially when it's as big as Disney's cable business. "I don't want any offsets," Jim said. "I just want everything going well." (Jim Cramer's Charitable Trust is long DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. A sign welcomes visitors near an entrance to Walt Disney World on February 01, 2024, in Orlando, Florida. Joe Raedle | Getty Images