The year 2021 was marred by the unexpected underperformance of Walt Disney (DIS:NYE) in the stock market. A few could have already anticipated this development. Disney’s stock plummeted by more than 60% from its all-time high of $203 per share in 2021, leaving investors skeptical. Yet, in the midst of this disheartening downturn, there are compelling reasons to believe that Disney is poised for a comeback. In this comprehensive analysis, we delve into the DIS stock forecast and the potential for a financial resurgence.
DIS Stock Forecast: A Technical Perspective
DIS stock forecast reveals an impending turnaround. They placed Disney’s stock within the ‘golden ratio’ range of 61.8% to 78.6% retracement from its historical highs. Furthermore, the stock is bolstered robustly suggesting the potential for an immediate rebound to the mid-$80 range per share.
Walt Disney: Financial Comeback
The COVID-19 pandemic wrought significant changes to Disney’s financial market. However, historical data offers a valuable benchmark to gauge the company’s efforts to restore its former financial prowess.
DIS Stock Forecast: Past Performance
Disney has the potential to create a protective moat around its margins, influencing pricing dynamics and input costs. In 2017, the company enjoyed gross margins of 45%. However, today that figure has slipped to 34.2%. This contraction reflects the challenges faced along the way from the pandemic’s effects.
Walt Disney’s Valuations Comparison:
Moreover, Disney’s net income margins have seen a significant contraction, plunging from a high of 22% in 2018 to a mere 4.2% today. The company’s substantial investments in its streaming branch, Disney+ were marked by acquisitions and capital allocations. Hence, this led to a surge in investing cash flow.
In 2019, investing cash flows represented less than 30% of operating cash flows, although they have since risen to over 80%. This strategic move may not have been immediately embraced by the markets, given the slow path to profitability in the streaming segment, which still records net losses.
Disney’s Revenue Growth and EPS:
However, there is a silver lining. Disney’s latest quarterly earnings report shows promising signs for the streaming business. A 9% revenue growth and a narrowing net loss from $700 Million to $500 Million. Active subscribers also increased by 1.4 Million in the quarter. Hence, showcasing the growing market share commanded by the service.
Disney’s Theme Parks: Growth Contribution
The streaming segment appears to be gradually moving toward economies of scale, potentially leading to a bottom-line breakeven or even profitability. Concurrently, Disney’s theme parks are contributing significantly to the company’s growth.
International parks, particularly those in Hong Kong and Shanghai, reported a staggering annual revenue jump of 94%. Thus, showcasing the benefits of Asia’s economic resurgence following reopenings and monetary stimulus. Domestic parks also enjoyed a 4% revenue growth, resulting in a combined segment growth of 13%.
DIS Stock Forecast: Analyst Insights
Despite the recent price decline, analysts maintain a slightly bearish outlook on Disney, showing resilience against the prevailing market trends. With a consensus price target of USD 115.37 per share, investors stand to gain a substantial 42.47% upside. The current price of (DIS:NYE) is USD 80.57. This closes the value gap that has opened up over the past year.
Disney has a high market CAP of USD 148.56 Billion. The stock is low in volatility and has offered a positive cash flow in the recent 4 quarters. However, it is overpriced compared to its peers.
An analyst at Wells Fargo & Company maintains an Overweight rating on Disney stock. Furthermore, he decreased the price target of the DIS stock forecast from USD 146 to USD 110. The joint analysts’ consensus rates the stock as a “Strong Buy”.
Upside Potential: A Glimpse into the Future
While Disney’s size does not make it a high-growth stock, analysts anticipate significant improvements in key financial metrics over the next twelve months. Projections suggest a remarkable 41.8% increase in earnings per share (EPS). Typically, EPS has a substantial influence on a stock’s valuation, making the DIS stock forecast all the more compelling.
Another potential catalyst for a substantial breakout lies in the reinstatement of dividends of (DIS:NYE). It was temporarily halted during the pandemic to allocate resources to the streaming business and mitigate losses from park closures. The company’s ability to restore its free cash flows, essential for dividend payments and other shareholder-friendly programs such as share buybacks, is crucial in this context.
Comparing the same quarter from the previous year, Disney has transformed its free cash flow from a negative $317 Million to a more promising $1.5 Billion. This shift paves a clear path for management to consider resuming dividend payments to shareholders.
Final Takeaway:
In conclusion, Disney is actively working to regain its financial strength. Investors should closely monitor Disney’s journey as it aims to rewrite its stock’s narrative. As with any investment, conducting thorough research and consulting a financial advisor remains prudent. However, the DIS stock forecast suggests a promising opportunity for those with a long-term perspective.
