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Should You ‘Buy’ Disney Stock after Business Update?

Ambrish Shah - Author

Sep. 4 2020, Updated 6:51 a.m. ET

Walt Disney (NYSE:DIS) stock rose 7% in extended trading on Wednesday. The company announced that Disney+ surpassed 50 million customers globally. On Wednesday, Disney stock fell 0.2% and closed at $101.07. Based on the last closing price, the company has a market cap of $182.5 billion. The stock price has risen 6.5% in the trailing five-day period, while it has fallen 12.1% in the trailing 12-month period.

Currently, Disney stock is trading 34.1% below its 52-week high of $153.41 on November 26, 2019. The stock is also trading 27.8% above its 52-week low of $79.07 on March 18, 2020. On a year-to-date basis, the stock has fallen by 30.1% as of Wednesday.

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Disney+ surpassed 50 million users

Disney+ is a new streaming video service that was launched by Walt Disney in November 2019. On Wednesday, Walt Disney announced that Disney+ has more than 50 million subscribers. As of December 28, 2019, the service had 26.5 million subscribers. According to a CNBC report, “At the time, former CEO Bob Iger said that about 20% of those subscribers came through a distribution partnership with Verizon. Disney+ is offered for free to some Verizon customers for a year.” The report also said, “Disney+ rolled out in the U.K, Ireland, France, Germany, Italy, Spain, Austria and Switzerland in the past two weeks, the company said. It also launched in India last week.”

Amid the lockdown due to the coronavirus outbreak, people spend more time streaming online. Netflix (NASDAQ:NFLX), the market leader, has more than 167 million customers globally.

Analysts’ earnings expectations

Disney reported sales of $20.86 billion in the first quarter of fiscal 2020, which ended in December—a rise of 36.3% YoY (year-over-year). The company reported an adjusted EPS of $1.53 in the first quarter of fiscal 2020 compared to $1.84 in the first quarter of fiscal 2019. Wall Street analysts expected the company to post sales of $20.79 billion and earnings of $1.44 in the first quarter of fiscal 2020.

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Wall Street analysts expect Disney to report sales of $18.3 billion in the second quarter of fiscal 2020. The figure would mark an increase of 22.7% YoY compared to $14.9 billion in the second quarter of fiscal 2019. Also, analysts expect the company to report an adjusted EPS of $1.00 in the second quarter of fiscal 2020 compared to $1.61 in the second quarter of fiscal 2019. Currently, analysts expect a 7.8% and 10.6% rise in the company’s fiscal 2020 and 2021 revenues, respectively. Analysts also expect an adjusted EPS of $4.01 and $5.24 in fiscal 2020 and 2021, respectively.

Analysts’ recommendations for Disney stock

Among the 27 analysts covering Disney stock, 20 recommend a “buy”—down from 21 the previous month. Meanwhile, seven analysts recommend a “hold”—up from six the previous month. None of the analysts recommended a “sell” over the last six months. Analysts have an average target price of $135.54 on Disney. The target price implies a return of 34.1% based on the closing price of $101.07 on Wednesday. The consensus target price for the stock has fallen from $157.71 in March—a fall of 14.1%.

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After the Disney+ business updated yesterday, J.P. Morgan analyst Alexia Quadrani reiterated her target price of $140 on Disney stock and kept an “overweight” rating. According to a MarketWatch report, Quadrani said, “We view Disney+ as a core driver to the company’s extensive ecosystem of consumer touchpoints, which we believe will benefit the Parks and Studio once normal operations resume.”

Dish Network (NYSE:DISH) and Comcast (NASDAQ:CMCSA) have average broker target prices of $40.52 and $47.33, respectively. These figures imply returns of 86.0% and 25.6%, respectively, over the next 12 months.

Disney’s stock performance

On Wednesday, Disney stock was trading 5.1% above its 20-day moving average of $96.15. Meanwhile, the stock is trading 13.4% below its 50-day moving average of $116.77 and 23.1% below its 100-day moving average of $131.43. Disney’s 14-day RSI (relative strength index) score is 47. The RSI suggests that the stock isn’t “overbought” or “oversold.”

Disney has an upper Bollinger Band level of $106.42. The company’s middle Bollinger Band level is $96.15, while its lower Bollinger Band level is $85.88. On Wednesday, the stock closed near its middle Bollinger Band level, which suggests that it’s neutral. Disney’s 14-day MACD is 3.74, which indicates that the stock is on an upward trading trend.

Currently, Disney stock is trading at 25.20x its fiscal 2020 estimated EPS of $4.01. The stock is trading at 19.30x its fiscal 2021 estimated EPS of $5.24. Analysts expect Disney’s earnings to grow at a CAGR of 3.2% over the next five years. As of Wednesday, Disney’s dividend yield was 1.74%.

Read 3 Things to Know before Putting Your Money in Disney Stock and Disney Stock Fell 18% in March, Can It Rebound in April? to learn more. You can also read Disney Stock Jumps as Executives Take a Pay Cut.


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