Walt Disney got much love on Wall Street this week as analysts advised to buy the beaten up stock, after being dazzled by its latest moves in streaming and strong parks foundation.
So far this year,
Disney
‘s (ticker: DIS) stock, down nearly 7%, has left much to be desired. The price is sitting around the lows reached 10 years ago while the S&P 500 index has gained almost 11% so far this year. The biggest hit to shares over the past month (a 3.6% slip) came after Disney announced plans to double investment in its parks and cruises over the next decade.
The move comes amid a decline in visitors to the group’s theme parks in the U.S. In its latest earnings report on Aug. 9, Disney said attendance grew by 1% in the quarter that ended on July 1. This is in contrast to the 93% growth posted for the same quarter last year. Investors have also been waiting for the company to reinstate its dividend payout, which was suspended during the Covid-19 pandemic.
Disney’s stock was up 2.3% at $ 82.64 on Friday. It was a Barron’s stock pick in July.
Despite the challenges, Seaport Research Partners published a note Friday initiating coverage on Disney with a Buy rating and a target of $93 for price. Analyst David Joyce said investors should “take advantage of the maximum pessimism” as Disney is in the midst of a historically significant business review.
Joyce was referring to the latest decision to invest in theme parks, which may boost profit margins. He added that Disney’s 80% ownership in sports channel ESPN means offering the channel as a fully stand-alone streaming service in the future could further engage customers.
Disney didn’t immediately respond to a request for comment from Barron’s. CEO Bob Iger in August acknowledged the complexity of separating linear TV from ESPN but expressed confidence in the firm’s ability to handle it.
Bernstein analysts led by Laurent Yoon also initiated coverage on Disney with a Outperform rating and a $103 price target on Thursday. Their rationale also hinges on cord-cutting at Disney—by taking full ownership of Hulu. It currently owns two-thirds of the company, and said it has accelerated the process to speed up buying the rest from
Comcast.
It’s “the only credible challenger to
Netflix.
Oh, Plus Parks,” said Yoon.
Disney trades at 16.6 times its next 12-months’ earnings, which is cheaper than Netflix’s 25.6 times price-to-earnings ratio.
Write to Karishma Vanjani at [email protected].
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