Shares of media and entertainment giant Disney (DIS) have officially corrected. Since hitting a high of more than $200 per share in March, shares have been on a rather steady decline to the $169 level at the time of writing.
This 15% discount to all-time highs is a juicy one for long-term investors in Disney. Indeed, those who wish to add to their collection of this high-quality blue-chip stock may be enticed to do so now. There are a number of reasons for this.
Investors have a few key issues on their radar when it comes to Disney stock. (See Disney stock analysis on TipRanks)
Streaming Growth All the Rage These Days
Disney’s long-term growth prospects have received a much-needed boost throughout the pandemic due to the company’s well-timed Disney+ launch before the pandemic.
No one knows whether CEO Bob Chapek has a crystal ball, but Disney+ has taken off as former moviegoers sought a massive amount of in-home entertainment this past year.
The growth in Disney+ subscribers thus far has been meteoric. Disney was able to generate 100 million subscribers for its Disney+ platform in less than a year and a half. It took Netflix (NFLX) roughly ten years to accomplish the same goal.
Other data suggest Disney+ subscribers are “stickier” than investors initially though. The company’s relatively low pricing plan for its platform has given the company what appears to be a competitive niche in a high-growth market. Investors appreciate the company’s ability to retain customers.
Now, Disney is investing billions of dollars into this platform. That’s going to cause a cash drain for a while, and it’s not yet profitable. However, looking at how Netflix has grown over the past ten years, it’s possible to forecast great things for Disney+.
Post-Pandemic Surge Driving Expectations Higher
Additionally, there continues to be a ton of anticipation around the kind of revenue growth Disney could see from the resumption of activity in its theme parks and travel-related businesses.
The pandemic had caused Disney’s theme parks, cruise operations, and hospitality businesses to completely shutter. There’s hope that a surge in demand will be able to make up for lost time moving forward.
It remains to be seen whether a revenue boom will take hold in these segments. However, an accelerated vaccination rollout and the resumption of activity at the company’s flagship theme parks herald great promise for the company.
What Analysts Are Saying About DIS Stock
According to TipRanks’ consensus analyst rating, DIS stock comes in as a Strong Buy. Out of 21 analyst ratings, there are 18 Buy recommendations and 3 Hold recommendations.
As for price targets, the average analyst price target is $209.89 with 24% upside potential. Analyst price targets range from a low of $163.00 per share to a high of $230.00 per share.
Bottom Line
Disney is a world-class company that is currently trading at a level which many long-term investors may find attractive. The company’s portfolio of intellectual property is among the most valuable of any blue-chip company on the market today. Accordingly, Disney’s business model is much more defensive than other high-growth options in the marketplace today.
For those true believers in the potential of Disney+ to take off and disrupt the streaming space, Disney’s valuation may not be too steep. For others valuing this company more on its revenue from its theme parks and media divisions, the valuation may be less attractive.
Disney’s long-term growth rate has likely received a shot in the arm from the company’s digitization efforts. It is up to the individual investor to decide about the extent to which this has already been priced in.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
