The Walt Disney Company filed as a stalking-horse bidder in Character.AI's Chapter 11 bankruptcy, offering $20 million for a non-exclusive, perpetual license to selected intellectual property. The filing, reported by TechCrunch citing Bloomberg, also includes an agreement to employ at least 60 Character.AI staff, with estimated annual costs of $60 million plus retention awards. This move occurred while Disney shares posted their longest winning streak since September 2013, closing at $112.52 on October 23, 11.04% above the October 1 close.
The stock gained 5.4% from September 30 to October 16, outperforming the S&P 500's 0.1% total-return gain over the same period. Citi raised its price target to $140 from $135 on October 16, but no single announcement explains the rally. The deal with Character.AI is not final; on October 23, 31 states and the District of Columbia objected to the proposed sale rules. They requested the court reduce Disney's $700,000 bid fee, extend time for rival bidders, and decline to approve releases granted to Disney. A hearing on procedures is set for October 30, with bids proposed by November 20.
Character.AI's filing cited potential litigation liabilities. Disney is licensing technology and hiring staff rather than purchasing the company outright. CFO Hugh Johnston stated on September 9 that embracing technology is a priority for CEO Josh D'Amaro to increase monetization of Disney's intellectual property. Johnston noted that leaning into AI makes sense for the company's strategy.
From September 30 to October 23, Disney's next-twelve-month P/E on normalized earnings rose from 13.92 to 14.88. Analysts' next-twelve-month normalized EPS estimate edged up from $7.54 to $7.56 during this stretch, meaning the multiple expansion accounts for nearly all of the stock's 7.3% gain. Disney still trades below its late September 2025 multiple of 18.61.
Analyst sentiment leans bullish, with TIKR tracking 23 Buys, 6 Outperforms, 3 Holds, and 1 Sell among 33 analysts. The mean price target stands at $126.58, which is 12.5% above the October 23 close. This average has slipped from $133.22 a year earlier, while the highest target fell from $163 in late June to $144.
Johnston described Disney as an "earnings compounder type of company." However, he warned that added supply is pressuring streaming ad pricing, with expectations for "a little bit of softness to continue in Q4." The lowest 12-month target on Wall Street is $86, sitting 23.6% below the recent close.
Disney will release fiscal fourth-quarter results before market open on November 17. For that period, which features an additional week in the calendar, analysts project revenue of $25.19 billion and normalized earnings per share of $1.69. The company has guided to double-digit adjusted EPS growth in fiscal 2027, excluding that additional week. Analysts estimate 8.1% normalized EPS growth for fiscal 2027 to reach $7.50. Disney stated the extra week lifts fiscal 2026 adjusted EPS growth to about 16% from about 12%. A reaffirmed double-digit outlook would support the current multiple, while a cut would leave the recent stock run resting on valuation expansion alone.