Summary
Disney is down 14% since its peak in March, creating a buying opportunity.
A combination of legacy and new streaming business means Disney has more revenue in the long run.
The Wall Street consensus is a 20% total return over the next 12 months.
Since the pandemic hit in early 2020, one of America's most iconic brands, the Walt Disney Company (NYSE:), has undergone a major transformation. At a time when the most prominent segments – theme parks, cruise ships and theaters – were abandoned due to lockdowns and closures, the newer Disney+ video streaming activity was booming, giving investors good reason to stay loyal to House of Mouse.
A Of the most surprising turnaround during this crazy COVID year, the shares of the world's largest entertainment company hit new highs in March 2021, although the company lost about $2.8 billion in 2020.
The stock has more than doubled from its March 2020 low, when fears of the coronavirus rocked the entire market.
Reopening of the economy, stocks dwindling
seem eager to resume their normal lives after a massive vaccination campaign in the US and abroad, there are signs that the growth in user streaming is a major factor. long engine of expansion that has pushed stocks up, losing momentum.[19459] 004]
In May, Disney+ reported that it had added 103.6 million customers, less than the 110.3 million analysts had expected. Shares of the Burbank, California-based company have responded to this slowdown, giving up 15% of their value since hitting a record $203 intraday in early March. The stock closed at $175.13 on Thursday, down about 1%. We believe this bearish period provides a good entry point for long-term investors, as the 97-year-old Disney continues to enter a strong phase of growth in the post-pandemic world, fueled by its legacy businesses, including theme parks, and the direct-to-consumer streaming service.
There may be some bumps on this road to recovery as the pandemic evolves and the emergence of variants slows its full reopening, but Disney's diversified business has what it takes to eventually recover. Indeed, the first signs of this turnaround are already there.
Theme parks recovering
During a JPMorgan investor conference in May, Disney CEO Bob Chapek predicted "low double increase" in park attendance in the coming months. He also added, in a Wall Street Journal report, that by the end of the current fiscal year in September, the company expects it to "take full advantage of some of these easing." of guidelines" improved the outlook for Disney in the coming months, prompting many top analysts to predict that Disney's theme park business, which made up one-third of the company before the pandemic, will soon return to normal. Wall Street estimates according to Visible Alpha will grow the company's combined domestic and international theme park revenues in the current quarter ending June, according to Visib le Alpha. the segment averaged over the same period during the five years before the pandemic.
100 million subscribers
As far as Disney's streaming business is concerned, it has quickly become one of the major players in the segment, reaching millions of subscribers since its launch at the end of 2019 . The service already has more than 100 million subscribers, making Disney the most successful entrant to this arena, all of whom are trying to capture a share of a market still dominated by Netflix (NASDAQ:).
Of all the companies entering the streaming wars, including Amazon (NASDAQ:), Apple (NASDAQ:), and NBCUniversal's Peacock service (NASDAQ:), Disney+ has significant advantages. It has an extensive collection of its own animation and live-action movies from Disney studios, along with popular television shows on its own cable networks, plus properties such as the Marvel and Star Wars franchises. Powered by recent hit titles like "The Mandalorian" and "WandaVision," Disney+ is on track to meet the company's own forecast of 260 million subscribers by 2024.
The Guardian, in an article published in mid-March, quoted Ampre Analysis analyst Richard Broughton as saying:
“Disney+ has clearly had some of the fastest growth of a subscription video on demand subscription; kudos to them for establishing themselves as a global force so quickly.”
According to Ampre's forecast, Disney could overtake Amazon's Prime Video service by 2024 and become the second most popular streaming service in the world.
NFLX:AMZN:DIS Projections 2005-2025
Chart Courtesy of The Guardian
Ampre's Broughton believes that Disney will see Netflix a year later, in 2025, from its top spot.
Due to its unique advantages, Wall Street analysts are mostly optimistic about Disney stocks despite the current pandemic-related challenges.
Chart: Investing.com
According to consensus estimates published on Investing.com, from 27 analysts surveyed, a significant majority have an "outperform" rating for the stock, with upside potential of 20%. For investors looking for technical signals to help make short-term investment decisions, the most popular indicators – moving averages, oscillators and pivots – offer a mixed picture after recent market volatility.
Chart: Investing.com
In the ongoing sell-off, the stock could fall back to the support level of just below $170 set in late 2020 after Disney+ crushed expectations about subscriber growth . If this support level holds, we could see the stock bounce back to its recent highs.
Bullish buy signals
For investors focused on fundamentals, there are plenty of reasons to enter this trade now. JPMorgan is one of the most optimistic forecasters for Disney stocks, with a price target of $220 a share, 24% higher than where the stock closed Tuesday. In a recent note, the bank said:
"With the ongoing digital transformation and recovery of the legacy business, Disney remains our top choice of media in 2021, and we view the current levels as a particularly favorable starting point for the long-term investor."
JPMorgan analysts predict that Disney's company box office will recover after the second half of the year, after which the company will return to exclusive theatrical releases.
“Disney continues to see improvements with domestic capacity parks likely to reach normalized levels in FQ4. Demand remains robust, with customers intending to visit the parks returning to 2019 levels at Walt Disney World, a strong sign for the coming quarters," the note said.
Another reason to remain optimistic about DIS is the potential resumption of payouts that have been suspended since May last year. The company has long returned capital to investors, spending $2.9 billion in the fiscal year leading up to the pandemic. But like other companies involved in tourism and travel, Disney has since skipped its $0.88 per share dividend. future cash flows from its pandemic-affected companies, it will be able to resume its cash distributions.
Bottom Line
Disney offers a winning combination for long-term investors. Its core business, including theme parks and cinemas, returns to growth as the streaming unit emerges as a powerful competitor in the post-pandemic world.
