Walt Disney’s Potential Turnaround

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Investors are buzzing on Wall Street as they predict a potential turnaround for Walt Disney (ticker: DIS) following their recent strategic moves in the streaming industry and solid foundation in theme parks.

Unfortunately, Disney’s stock has been underperforming this year, with a decline of nearly 7%. Its current price remains stagnant, hovering around levels last seen a decade ago, while the S&P 500 index has shown an impressive gain of almost 11% thus far. Interestingly, the stock took a major hit (slipping 3.6%) when Disney announced their ambitious plan to double investments in parks and cruises over the next ten years.

The decision to increase spending coincided with a decrease in visitors to their U.S. theme parks. According to Disney’s latest earnings report on Aug 9, park attendance grew by only 1% in the quarter ending July 1. This meager growth is a stark contrast to the astounding 93% increase reported during the same period last year. Additionally, investors have eagerly awaited the reinstatement of the company’s dividend payout, which was suspended due to the impact of the Covid-19 pandemic.

As of now, Disney’s stock remains relatively stable, trading flat after the opening bell on Friday. However, it is worth noting that the stock was a recommended pick by ‘s in July, suggesting a glimmer of hope for its future performance.

Disney: Navigating Challenges with Optimism

Seaport Research Partners recently released a comprehensive report on Disney, providing a Buy rating and a target price of $93. Despite the current challenges faced by the company, Seaport Research Partners believes that investors should seize this opportunity to capitalize on Disney’s historical significance in the business world.

One of the key factors contributing to this optimism is Disney’s strategic decision to invest in theme parks. This move is expected to significantly enhance Disney’s profit margins. Furthermore, Disney’s 80% ownership in sports channel ESPN sets the stage for offering the channel as a standalone streaming service in the future, thus increasing customer engagement.

CEO Bob Iger acknowledged the complexity involved in separating linear TV from ESPN but expressed confidence in the company’s ability to handle it. While Disney has yet to respond to a request for comment, Iger remains optimistic about the outcome.

Bernstein analysts, led by Laurent Yoon, also initiated coverage on Disney, providing an Outperform rating and setting a target price of $103. Their analysis takes into consideration the cord-cutting trend at Disney, as well as Disney’s plans to take full ownership of Hulu. Currently owning two-thirds of the company, Disney has expeditiously accelerated the process of acquiring the remaining portion from Comcast.

Laurent Yoon refers to Hulu as “the only credible challenger to Netflix. Oh, Plus Parks.” This statement underscores the potential for substantial growth and profitability for Disney.

In terms of valuation, Disney trades at a price-to-earnings ratio of 16.6 times its next 12-month earnings, making it more affordably valued compared to Netflix’s ratio of 25.6 times.

Overall, despite the challenges faced by Disney, there is significant opportunity for growth and success. With their strategic investments and optimistic outlook, Disney continues to position itself as a dominant player in the industry.

Key Highlights:

  • Seaport Research Partners initiates coverage on Disney with a Buy rating and a target price of $93
  • Disney’s decision to invest in theme parks expected to boost profit margins
  • Disney’s ownership in ESPN sets the foundation for a standalone streaming service
  • CEO Bob Iger expresses confidence in handling the complexities of separating linear TV from ESPN
  • Bernstein analysts provide an Outperform rating and a target price of $103
  • Disney accelerates its process of acquiring full ownership of Hulu from Comcast
  • Hulu seen as the only credible challenger to Netflix
  • Disney trades at a more affordable valuation compared to Netflix
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