Walt Disney (NYSE:DIS) stock is under pressure and has underperformed the NASDAQ 100 Index this year. Disney has lost about 18% of its value on a year-to-date basis and is trading near the 52-week low.
A moderation in its paid subscriber growth rate and the latest variant of the coronavirus continues to play spoilsport.
It’s worth noting that Disney added 12.4 million Disney+ subscribers in Q3 on a quarter-over-quarter basis. However, its growth slowed, and it managed to acquire only 2.1 million paid subscribers in Q4 on a sequential basis.
What Lies Ahead?
The deceleration in the paid subscriber growth rate and margin headwinds stemming from increased content expenses could continue to hurt Disney’s near-term prospects. However, its long-term fundamentals remain intact.
It’s worth noting that Disney stock has received positive indicators from investors and hedge funds. TipRanks’ Stock Investors tool shows that 1.1% of investors holding portfolios on TipRanks have increased their stakes in Disney in the past month. Moreover, hedge funds have increased their holdings by 244K shares over the past three months.
Disney is ramping up its content expenses, which will likely give a significant boost to its paid member growth rate. It expects paid subscribers to reach 230-260 million by FY24. Meanwhile, it projects Disney+ to turn profitable in FY24.
Citing the increase in content expenses and “compelling content pipeline,” Kutgun Maral of RBC Capital reiterated his Buy rating on Disney stock. Further, he sees Disney “emerging well-positioned in a post-coronavirus world.”
Wall Street’s Take
Along with Maral, most analysts have a favorable outlook on Disney stock. On TipRanks, Disney has received 17 Buys and 6 Holds for a Moderate Buy consensus rating. On TipRanks, Disney sports a Strong Buy consensus rating based on 18 Buys and 6 Holds.
Further, Disney’s stock forecast and price targets on TipRanks show solid upside due to the recent pullback in its price. The average Disney price target of $199.23 indicates 33.9% 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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