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Disney Stock Hits New Low: Now What?
Stock Analysis & Ideas

Disney Stock Hits New Low: Now What?

Walt Disney (DIS) stock remains under pressure, eroding shareholders’ wealth. To be precise, Disney stock has lost nearly 19.3% in value on a year-to-date basis (compared to 18.8% growth in the Nasdaq composite index) and is trading near a 52-week low of $142.04.

A confluence of factors, including overall selling in the broader markets, a new variant of the resurgent coronavirus, pressure on margins, and a moderation in the paid subscribers growth rate, have weighed on Disney stock. 

It’s worth noting that Disney managed to acquire 2.1 million paid subscribers for Disney+ on a quarter-over-quarter basis in Q4. In comparison, Disney added 12.4 million subscribers on a sequential basis in Q3. This represents a massive drop in the customer acquisition growth rate. 

Now What?

Despite the moderation in growth, Disney CEO Bob Chapek remains confident and reiterated the long-term guidance. Chapek expects Disney+’s paid subscribers to reach 230 million to 260 million globally by the end of FY24. Furthermore, the company expects Disney+ to turn profitable during the same year. 

Disney remains upbeat about its 2022 content slate, which could drive its paid subscriber base. However, Disney CFO Christine McCarthy doesn’t expect the growth to be linear. McCarthy expects Disney+ subscriber net additions to be higher in the second half of FY22 than the first half. 

It’s worth noting that Disney stock has positive indicators from hedge fund managers and investors. TipRanks’ Hedge Fund Trading Activity tool indicates that hedge funds have added 244K Disney shares to their portfolios in the last three months. 

Meanwhile, TipRanks’ Stock Investors tool indicates that investors have a very positive outlook on Disney. The data shows that 0.8% of investors holding portfolios on TipRanks have increased their exposure to Disney stock in the last seven days.

Disney’s long-term fundamentals remain intact. Moreover, the company expects the attendance at its parks and resorts to recover by the end of 2022. However, Disney is planning to ramp up long-term expenses for Disney+, which could put pressure on margins. Also, it expects losses to peak for Disney+ in 2022. 

Wall Street’s Take

Wall Street remains cautiously optimistic about Disney stock due to the moderation in its paid subscriber growth rate. Overall, on TipRanks, Disney sports a Moderate Buy consensus rating based on 17 Buys and 6 Holds. 

Meanwhile, Disney stock scores a 9 out of 10 from TipRanks’ Smart Score rating system, which indicates that it could outperform the market averages.

See Top Smart Score stocks >>

The average Walt Disney price target of $204.05 implies 39.6% 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.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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