Disney Stock Forecast: Is This Beloved Institution a Buy?
When it comes to putting together a Disney stock forecast, there is a lot to consider. First and foremost, it’s worth noting that in the United States, there are few companies that are as beloved as the Walt Disney Company. Most kids grow up watching Disney movies… Playing with toys of the characters… And dreaming of a trip to one of its theme parks. This is just part of the reason that Mickey Mouse has built up worldwide brand awareness of 97%. This makes Disney’s chief mascot more recognizable than Santa Clause.
Additionally, what started with just a mouse has grown into one of the largest entertainment conglomerates in the world. Today, Disney boasts a list of assets that has just about everything consumers love:
- Disney Animation
- Pixar
- Marvel
- Star Wars
- Hulu
- ESPN
- 21st Century Fox
As far as investing goes, Disney is one of those rare stocks where it’s almost never a bad idea to buy some. Disney has seemingly unlimited demand for its movies and parks. It’s essentially a money-printing machine… Or at least it was until the coronavirus pandemic hit.
COVID-19 forced Disney to shut down its parks completely for just about an entire year. That made a Disney stock forecast slightly more difficult in the past. Nonetheless, the significance of this can’t be overstated. Disneyland has closed down just twice in its 66-year history. The first time was in 1963 when President John F. Kennedy was assassinated. The second was in 2001 due to the 9/11 terror attacks.
So, will the pandemic have a long-term negative impact on Disney’s stock price? Or is it a short-term issue that has created a great time to buy more stock and average down?
Let’s take a look at a Disney stock forecast and find out!
Disney Stock Forecast (NYSE: DIS)
When making a Disney stock forecast, it’s important to look at its leadership team. Notably, Disney recently welcomed a new CEO. Bob Chapek took the helm in February 2020 after former CEO Bob Iger stepped down. If you’ve ever felt stressed at your job, just imagine taking over as Disney’s CEO just one month before a once-in-a-lifetime pandemic strikes.
Prior to stepping down, Iger had an incredibly successful run as Disney’s CEO. In total, he was there for 14 years. During his tenure, Disney’s stock price increased by about 12% annually. He was also responsible for buying Star Wars, Marvel, and Pixar as well as launching Disney+. On one hand, investors can rest easy because Chapek is taking over a well-oiled machine. On the other hand, Iger’s leadership will definitely be missed.
With a massive company like Disney, it’s important to understand all of the different ways that it makes money.
Disney’s business segments:
- Media Networks
- Parks, Experiences, and Products
- Studio Entertainment
- Direct-To-Consumer (DTC)
- International
In 2019, these business lines brought in $69 billion in total revenue and net income of $11.5 billion. This translated to annual earnings per share of $6.64. 2020 was obviously a much different story as several key pieces of Disney’s business were closed for months on end. However, Disney has bounced back strongly in 2021 and reported Q3 2021 revenue of $17 billion. Its bottom line has also been back in the green recently. Disney posted a net income of $901 million in Q2 2021 and $918 million in Q3 2021.
Disney’s saving grace during the pandemic was mainly its new streaming service: Disney+. While parks were closed and movie production was halted, Disney+ was able to continue as usual.
On July 3rd, 2021 Disney announced the following membership numbers:
- Disney+ – 116 million
- ESPN+ – 14.9 million
- Hulu – 42.8 million
- Total membership base – 173.7 million
Ready For The Competition
For reference, the top streaming dog, Netflix (Nasdaq: NFLX) currently has about 209 million subscribers. What makes Disney such a formidable foe in the streaming industry is the size of its content base.
Disney has decades of content to pull from to offer its viewers. Additionally, it has plenty of wells to draw from in terms of finding new content. Pixar should continue to churn out popular movies. Old characters could be revamped in new spinoff shows. Plus, fictional worlds like Star Wars or the Avengers can continue to be expanded on. And all of this will take place exclusively on Disney+.
Additionally, the fact that Disney also owns ESPN and Hulu means that Disney can bundle its services together. This means a higher overall value for customers, which creates another advantage over competitors.
Disney+ is still just about 2 years old. But it will be interesting to continue watching how Disney leverages this new service.
Disney Stock Price Forecast
Disney stock price has been a little more volatile than normal over the past year or so. In early 2020, it dropped by over 40% during the height of the pandemic crash. However, it rallied through the rest of 2020 and ended the year +20%. So far in 2021, Disney stock has mainly moved sideways.
It’s interesting that Disney’s stock has moved sideways while the overall market is up about 18%. That being said, Disney’s stock is up by about 90% over the past 5 years.
Disney Earnings Report
Disney’s next earnings report is scheduled for Nov. 10th, 2020.
Despite the turbulence from the COVID-19 pandemic, Disney’s recent earnings reports have been strong. Disney has beaten its past 4 earnings per share (EPS) expectations and 3 out of 4 of its revenue expectations. For the most part, it hasn’t even been close. For example, Disney has beaten its last 4 EPS expectations by 69%, 194%, 202%, and 45% respectively.
Disney has missed just one revenue expectation by 2% in Q2 of 2021. Interestingly, these strong reports have not really resulted in a rising stock price. So far in 2021, Disney’s stock is actually down 2%. This has made it somewhat difficult to compute a Disney stock forecast.
Is Disney Stock A Buy?
To answer this question (for any company) it’s always a good idea to look at what lies in the future. In Disney’s case, there are three newsworthy events coming up to consider.
First, Disney has already secured the year’s two highest-grossing films (Black Widow and Shang-Chi and the Legend of the Ten Rings). However, another star-studded film is set to release on October 15. The Last Duel will feature Matt Damon, Ben Affleck, and Jodie Comer. It’s also being directed by Ridley Scott.
Second, on October 19 Disney will introduce Disney Genie to its Florida park. This new planning tool will let guests reserve spots in line, create itineraries, and purchase paid access to fast lanes. If this rollout is successful, it could be a great value-add to visiting a Disney theme park. Since Disney parks were closed for almost all of 2020, there is likely to be a resurgence in park attendance as families try to reschedule previous trips and make up for lost time.
Lastly, Disney World has announced a new resort set to debut in March 2022. This premium resort is called Star Wars: Galactic Starcruiser. It will offer guests a two-night fully immersive cruise through “outer space.”
The Bottom Line on Disney Stock
In summary, The Walt Disney Company has had one of the toughest stretches in its history. However, it has successfully navigated the worst of the pandemic and it seems as though clearer skies are ahead. As far as its earnings expectations, Disney has largely outperformed analysts’ expectations. Despite this, Disney stock has moved sideways for most of 2021. But for how long that continues is uncertain.
I hope that you’ve found this Disney stock forecast valuable when it comes to learning whether or not you should buy Disney stock! As usual, all investment decisions should be based on your own due diligence and risk tolerance.
And if you’re looking for additional information on the best stocks to buy and hold, we recommend signing up for the Liberty Through Wealth e-letter. In it, Alexander Green helps investors find investment opportunities with the most momentum before institutional investors get in on the action. All you have to do is enter your email address in the box below to get started.
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions. I also have a small position in Disney.
