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Disney Stock: Dow Jones Dog Could Bounce Back
Stock Analysis & Ideas

Disney Stock: Dow Jones Dog Could Bounce Back

Legendary media and entertainment kingpin Disney (DIS) ended 2021 with the unenviable title of Dow Jones Industrial Average dog. Undoubtedly, it’s been a brutal year for the house of mouse amid ongoing COVID-19 pandemic pressures that hurt the parks and cruise business quite badly.

As Omicron peaks, Disney may prove to be the ultimate reopening stock for the summer, especially if the Omicron wave is the last one. Indeed, it’s hard to time the end of the pandemic, but eventually, it will end, and once it does, it’ll be hard to keep one of the Dow’s best blue chips down for a prolonged period.

Disney: More than Just a Reopening Stock

Indeed, reopening upside is encouraging, but there’s always a chance that the pandemic may last for another full year, if not longer. In such a scenario, the risk/reward at Disney stock still seems decent, given Disney’s pandemic-resilient growth drivers, including the Disney+ streaming platform, which has a rich slate of content for 2022, and the potential for investment in metaverse ambitions.

It’s not a mystery as to why Disney’s meetings have been such a needle-mover on DIS stock. The company is evolving before our eyes into more of a tech company, as many tech firms begin to inch into the media business with hopes of enjoying video-streaming growth.

Content remains king, and Disney’s brands will outlast this pandemic. For now, though, the bar is set way too low, and the company’s metaverse ambitions appear mostly ignored in favor of mounting COVID-19 headwinds. With one of the better valuations in the Dow, I remain incredibly bullish on shares of Disney at $157 and change per share.

What Can Go Right for Disney in 2022?

We all know what can go wrong for Disney—another COVID-19 variant of concern that could cause a wave post-Omicron.

As Omicron looks to peak over coming weeks, there’s some concern that a new strain dubbed as “Deltacron,” a combination of the two prior wave-causing COVID-19 variants that came before it, could cause trouble. For now, the strain is limited to Cyprus, with only 25 cases at writing. Still, future variants, Deltacron or not, represent a sizeable risk for Disney’s recovery hopes in 2022.

In any case, there’s too much pessimism baked into oversold shares of Disney. Whether we’re talking dampened parks numbers or disappointing net subscriber additions (and a downbeat guide) at its streaming platform, it’s clear that analysts aren’t expecting too much from the firm in this new year.

Disney Stock Has Already Been Punished Severely

Indeed, it seems like the band-aid has already been ripped off of the share price following a tough finish to 2021. Downbeat expectations for Disney+ in the first half of Fiscal 2022 make for a pretty low bar to pass, following Disney’s underwhelming Q4 2021 earnings miss.

With a robust line-up for its streaming platform, could management be playing it conservatively with its downbeat tone for coming growth to be had from Disney+? It’s possible. With the stock already fresh off a ~30% decline, the risk/reward seems tilted in favor of investors.

Even if Disney+ numbers are as soft as management expects them to be, Disney has been making some noise in the metaverse. The company recently got the green light for a “virtual world simulator” patent that shows Disney is very serious about the future of mixed-reality entertainment.

Indeed, the patent shows that Disney is exploring augmented reality (AR) worlds, which may very well represent the first natural jump before fully-immersive VR.

Indeed, once VR is ready for the mainstream, it would be incredible to “plug in” to a virtual Disneyland or be in the center of your favorite classic Disney film. Such VR tech may still be many years away, but Disney’s AR-focused ambitions could be achieved sooner than many think.

Wall Street’s Take

Turning to Wall Street, DIS stock comes in as a Moderate Buy. Out of 21 analyst ratings, 15 Buys and six Hold recommendations were assigned in the past three months.

The average Disney price target is $196.21, implying 24.5% upside potential. Analyst price targets range from a low of $168.00 per share to a high of $220.00 per share.

The Bottom Line on DIS Stock

With powerful brands and a profoundly sizeable fanbase, Disney’s metaverse may very well be the most popular virtual world out there once the time comes for virtual and augmented reality technology to take the world by storm.

For now, investors can shrug off Disney’s metaverse ambitions all they want, but it’s coming, and it could unlock a whole new world of growth opportunities.

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