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Could Disney Stock Flip to Green in 2021?
Stock Analysis & Ideas

Could Disney Stock Flip to Green in 2021?

Shares of Walt Disney (DIS) came under pressure, closing 4.2% lower on Tuesday, after the company provided Q4 estimates for its global paid subscribers. Its numbers failed to impress investors. 

Speaking at Goldman Sachs’ annual Communacopia conference, Walt Disney CEO Bob Chapek said that the company’s global paid subscribers would increase by “low single-digit millions” in Q4, compared to Q3. 

This compares unfavorably with the prior quarter. Notably, Disney added 14.7 million global paid subscribers in Q3. Chapek cited COVID-19 induced production delays and the annual expiration of many subscriptions in India as the reasons behind the moderation in subscriber growth. 

Nevertheless, Chapek remains confident about the long-term subscriber growth. Moreover, he expects the momentum in the core market to sustain, with steady growth in subscribers both in the domestic and international segments. Furthermore, he expects to reclaim all the subscribers in India.  

In response to Disney’s Q4 subscriber growth guidance, Brandon Nispel of KeyBanc termed it as “a very modest incremental negative.” Nispel remained upbeat over the long-term subscriber growth and maintained a Buy rating with a price target of $225 (31.5% upside potential). 

Overall, Disney stock has underperformed the broader markets so far this year. Its stock is down about 3.7% on a year-to-date basis. Moreover, it has declined about 11.3% in six months. (See Walt Disney stock charts on TipRanks)

Investors’ sentiment remains weak on Disney, owing to uncertainty over its theme parks, cinema attendance, and cruise ships, amid the pandemic.

Significantly, TipRanks’ Stock Investors tool indicates that investors currently have a Very Negative outlook on Walt Disney stock, with 1.4% of investors who hold portfolios on TipRanks decreasing their exposure over the past 30 days. I maintain a Neutral view on Disney stock.

During the conference call, Chapek added that reinstatement of dividend and share repurchases are still “in the distant future,” which is unlikely to lift investors’ sentiment. 

Nevertheless, the majority of Wall Street analysts have a favorable outlook on Disney stock. On TipRanks, DIS stock has an analyst rating consensus of Strong Buy, based on 16 Buys and 3 Holds. The average Walt Disney price target of $217.60 implies 27.1% upside potential to current levels.

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

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