Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Is Disney A Bet Worth Taking After Stock's 30% Decline So Far In 2022?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsJun 06, 2022 09:26AM ET
www.investing.com/analysis/is-disney-a-bet-worth-taking-after-stocks-30-decline-so-far-in-2022-200625339
Is Disney A Bet Worth Taking After Stock's 30% Decline So Far In 2022?
By Investing.com (Haris Anwar/Investing.com)   |  Jun 06, 2022 09:26AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
  • Disney is under pressure on concerns that subscriber growth in the company's streaming app will slow
  • Even as the stock slides, many analysts see an opportunity to buy, given the strength in the company’s other units
  • Disney is one of those stocks whose values are down significantly but their earnings have rebounded
  • Looking for more top-rated stock ideas to add to your portfolio? Members of InvestingPro+ get exclusive access to our research tools, data, and pre-selected screeners. Learn More »

It’s hard to pick long-term winners as the current technology stock rout continues. Investors are quickly coming to terms with a grim new reality—the decade-long boom in earnings and increasingly soaring stock prices seems to have come to an end.

Many tech companies have announced job cuts and hiring slowdowns; some have also slashed growth projections and shelved expansion plans. This new phase of diminished expectations is also evident in the once-hot streaming video arena where some of the largest players are now struggling to win new customers.

Shares of the world's largest entertainment company, the Walt Disney Company (NYSE:DIS), are down about 30% this year on concerns that subscriber growth in the company's streaming app, Disney+, will slow after remarkable gains during the past two years.

DIS Weekly TTM
DIS Weekly TTM

Investors are already expecting slower growth in the segment after Netflix (NASDAQ:NFLX) shocked Wall Street by reporting a surprise drop in subscribers in April, then forecasting an even steeper loss in the current quarter. That setback forced the company, the streaming-industry leader, to change its course and announce plans for a lower-priced version of the service that includes advertising.

Even as Disney stock heads for its biggest annual drop in at least 47 years, many analysts don’t see a gloomy future, betting that the Burbank, California-based 'House of Mouse' can avoid the loss of streaming-video subscribers that crushed rival Netflix’s share price.

A 44% Upside Potential

In an Investing.com poll of 30 analysts, the majority rated Disney a buy.

DIS Analyst Price Target
DIS Analyst Price Target

Source: Investing.com

Among those surveyed, the stock had a 44.21% upside potential with an average 12-month price target of $156.71.

Underpinning their bull case is the hope that Disney’s streaming unit still has room to grow and, unlike Netflix, DIS has a diversified business model which, along with its video platform, includes theme parks and resorts that are set to rebound now that pandemic lockdowns have ended in most parts of the world.

As well, in the most recent quarter, the company reported better-than-expected growth at its flagship Disney+ streaming service. The service finished the quarter with 137.7 million subscribers globally, up 33% from a year ago. Although the gain was smaller than the expansion during the previous three months, it was higher than Wall Street estimates of 134.4 million.

Sales at theme parks also recovered strongly. Earnings at the company’s resort division increased to $1.76 billion from a loss last year after guests returned to its hotels and theme parks. That trend will likely accelerate further during the summer months.

According to Credit Suisse, Disney is one of those undervalued stocks, down significantly this year, even though the company has seen earnings increase, making the stock look attractive at current levels.

Indeed, shares are down more than 40% from their high during the past one year, while the company’s EPS has jumped 46.3%.

In a recent note, the investment bank said:

“Given the severe and uneven decline in stock prices in recent months, sectors and portfolio characteristics (factors) have experienced dramatic shifts in their valuations, with some moving from extremes back to normal, and others still exhibiting substantial discounts or premiums relative to the market. Bottom-line, market disruptions realign opportunities.”

Needham, in a note last week, said it’s particularly bullish on Disney's Parks division, adding:

“In the Parks division, we expect revenue and OI (operating income) upside from increased capacity and higher per capita spend at the U.S. parks, as well as stronger than previously estimated results in the Paris and Tokyo parks, offset in part by the closure of the Shanghai park.”

Bottom Line

It’s hard to predict which direction Disney stock will go from here, given the highly uncertain macro environment which is hurting the majority of growth stocks.

But one thing is clear, the Burbank, California-based entertainment giant is in a much better position to weather the economic downturn than many of its rivals due to a diversified business model, allowing Disney to recover quickly once COVID conditions improve.

***

Interested in finding your next great idea? InvestingPro+ gives you the chance to screen through 135K+ stocks to find the fastest growing or most undervalued stocks in the world, with professional data, tools, and insights. Learn More »

Is Disney A Bet Worth Taking After Stock's 30% Decline So Far In 2022?
 

Related Articles

Is Disney A Bet Worth Taking After Stock's 30% Decline So Far In 2022?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Green Mango
Green Mango Jun 08, 2022 8:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
No. Deep recession coming and Disney will get throttled.
Jason Pickering
Jason Pickering Jun 07, 2022 10:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I tend to disagree with the author on the diversity of stock that will help them weather the macro-environment.  Disney in recent years has been limiting their diversifications in many ways.  First, Disney has been shutting down many of their Disney store line in favor of using existing Box chains, but mainly use of the Target stores to sale products.  Before they had those options but now has limited their reach of sales.  Further, the full tie in to Target has become a major problem now that Target is showing major losses which will cause Target to take sustainability measures.  Second, Disney attendance has been down since Covid and may never fully recover.  This has placed Disney as vulnerable to Universal who has a more Single adult base than Disney.  While Disney caters to families, Universal targets consumers with flow of cash.  Lastly, Disney Plus has limited the ability to remove content and diversify sales of video.  And Disney is limited to their video income.
Okwudili Nwankwo
Okwudili Nwankwo Jun 07, 2022 10:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
new age
new age Jun 06, 2022 1:53PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
in my humble opinion (as I don't know anything lol) I love disney and even more respect for sticking up for what it believes in over profit what other private company can you say that about! it's gonna come back we all know it... disney ain't going nowhere
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 1:53PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Frank Mattera
Frank Mattera Jun 06, 2022 1:53PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
“disney aint going now nowwhere” could not have said it better!!! Yikes!
Mark McMillan
Mark McMillan Jun 06, 2022 1:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I just visited the Orlando parks last week and it was chaotic. The lightning passes are very difficult to use and now they have rides they charge extra to ride. IMO if disney can't streamline it's operations things will get worse before they get better. Another point is that disney needs to stay out of politics and stop pushing agendas that may be controversial.
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 1:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Frank Mattera
Frank Mattera Jun 06, 2022 1:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
More of that coming
Kirk Adams
Kirk Adams Jun 06, 2022 1:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Disney stock didn't go down bc of Covid.. people began selling stock & canceling Disney+ subscriptions due to the company's stance towards grooming little kids. Most of those people won't return to Disney until the company turns away from pedophilia.
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 1:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Steven Kilgore
Steven Kilgore Jun 06, 2022 1:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I have liked Disney for a long time. With that said I dont want to own them now. I have never been a big fan companies that purposely pick fights with customers and/or governments. Disney may come out smelling like roses and at ATH’s but I still wouldn’t want to own them right now.
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 1:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thomas Parnel
Thomas Parnel Jun 06, 2022 8:37AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Any thoughts on what will happen now that Disney Florida will be subject to local government control and taxes ?  I see potentially billions in real estate taxes in their future.   A high price for shareholders to pay because of the liberal politics of management.  Time for a shareholder revolt as they are already heading for the door !
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 8:37AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Green Mango
Green Mango Jun 06, 2022 8:37AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Well, since you asked, they dare not fight due to "discovery" fallout. So other locations will get in on the act. Parent lawsuits, all potential. Corporate culture of manipulative practices involving minors. Run away, karma approaching.
Nick Iacoviello
Nick Iacoviello Jun 06, 2022 4:15AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Trying to change little boys into little girls is not acceptable. closed position in Disney.
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 4:15AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
عباس العراقي
عباس العراقي Jun 06, 2022 4:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Abbas
Okwudili Nwankwo
Okwudili Nwankwo Jun 06, 2022 4:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email