Yesterday, Disney (NYSE:DIS) sank like a stone with a sword in it after revealing that it was planning to ramp up spending in a big way on its parks and experiences. The idea looked like throwing a bale of good money after tossing bad spare change down a rat hole, but Disney is actually up somewhat in Wednesday afternoon’s trading. Why? Because analysts are reconsidering, and the idea of spending big on parks doesn’t seem so bad after all.
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Word came from one analyst who noted that Disney has invested heavily before and, generally, has seem these expenses pay off. After all, said analyst noted, Disney’s Parks unit was “…most vital to success over the long run,” which may only account for 36.7% of revenue but 77.3% of profits. And yes, Disney has also stated that it’s working to cut costs and reduce debt.
Of course, the idea that just because it used to work means that it will continue to do so doesn’t make much sense. After all, look at the bill for the Galactic Starcruiser experience and the $270 million that Disney dropped making “The Marvels” for release in theaters this November. Also consider the Disney Treasure, the new cruise liner that’s taking reservations now with bookings that start at just over $9,000 each in the middle of a shaky economy featuring people trying frantically to figure out how to cover grocery bills. It’s clear that Parks are a big deal for Disney. But maybe trying to ramp up that part of the ledger when the consumer is, at best, shaky might not be the best play near-term.
What is the Target Price for Disney?
At any rate, Disney still commands substantial analyst support. With 15 Buy ratings, five Holds, and two Sells, Disney stock is considered a Moderate Buy. Further, with an average price target of $108.33, Disney stock also boasts a healthy 30.69% upside potential.
