Disney shares are already trading at a discount, and will be a solid buy once they hit this level.
Disney (NYSE: DIS) has been hit particularly hard amid the coronavirus crisis.
It’s theme parks the world over have been shuttered indefinitely, its blockbuster movie productions put on hold.
“Disney has been particularly hard hit by the pandemic, impacted across virtually every segment of the company,” wrote Guggenheim analyst Michael Morris in a research note last week where he downgraded the stock from Buy to Neutral and cut his price target from $160 to $100. “We have lowered our revenue and operating profit estimates across all segments, with parks and resorts closures driving the most significant changes. In addition, we anticipate advertising pressure at media networks and lost profits due to the suspension of both feature film production and theatrical releases.”
The one bright spot in Disney’s portfolio is its Disney+ streaming platform, which the company reported this week has already surpassed 50 million subscribers within five months of its U.S. launch.
JPMorgan analyst Alexia Quadrani said she was “impressed by the surprise announcement” of the Disney+ subscriber numbers, and reiterated her Overweight rating on the stock, with a price target of $140 – nearly 35% higher than the current price.
“We view Disney+ as a core driver to the company’s extensive ecosystem of consumer touchpoints, which we believe will benefit the Parks and Studio once normal operations resume,” Quadrani wrote in a note to clients. “Disney’s early success in transitioning its business to a digital platform will likely award the stock a higher multiple as it increases conviction in its longer-term success and path to profitability.”
But while Wall Street is split on Disney, Miller Tabak equity strategist Matt Maley said this week that the stock will bounce back and that any weakness should be taken as a buying opportunity.
“It’s just getting too far overdone,” Maley said. “Now, I still think the overall market could see a retest of the old lows. So, it could see a little bit more weakness back down near that $90 level.”
Disney shares fell to around the $90 level last week, but have recovered this week to $104.50, as of this writing.
“People have to remember that, if you wait around for these theme parks to go back to full scale, up and running, with everything, all the people coming back, the stocks will have already bounced,” Maley said. “Always remember that the stocks always bounce before the fundamentals go back to normal.”
Maley said Disney shares would be a buy if the stock falls back down to around $90 – nearly 14% below where the stock trades currently.
“Take your time,” Maley added. “Don’t jump in with both feet, but you’re going to get some great prices here and in one or two to three years, you’re going to look really, really good in this stock.”
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