Disney Stock Price Forecast August 2021 – Time to Buy DIS?

Disney stock is trading flat this year and is underperforming the S&P 500. The stock hit its all-time high of $203.02 earlier this year but is now down almost 13% from the levels and is in the correction zone. What’s the forecast for DIS stock in August 2021 as the company prepares to release its quarterly earnings?

Disney would release its third-quarter fiscal 2021 earnings on Thursday after the close of US market hours. Analysts polled by TIKR expect the company to report earnings of $16.7 billion in the quarter, 42.3% higher than what it had posted in the corresponding period last year.

Disney second-quarter earnings

Meanwhile, the steep rise in Disney’s earnings is coming from a lower base as the company’s business was severely impacted by the COVID-19 pandemic. Its Parks segment was particularly affected as the theme parks were closed due to the lockdown restrictions. However, the company has now reopened the parks in the US.

Analysts expect Disney’s EPS to rise to $0.55 in the quarter. The company had posted a loss in the corresponding quarter last year. Meanwhile, along with the earnings, there would be several metrics that investors would watch in the company’s earnings call.

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DIS earnings call

During Disney’s earnings call, markets would watch out for any commentary on dividend restoration. The company had suspended the dividend last year as the pandemic took a toll on its earnings. Also, the subscriber numbers for the streaming service would be crucial to watch. In the previous quarter, it had added 8.7 million subscribers which were way below the 14 million that analysts were expecting.

Netflix also reported tepid subscriber numbers in the second quarter and gave soft guidance for the next quarter. After the surge in the first half of 2020 where the lockdowns lifted demand for its services, Netflix’s subscriber growth numbers have been coming down.

As for DIS, it saw a bump initially on the lower base effect and crossed the milestone of 100 million subscribers in the last quarter. This quarter’s subscriber numbers will tell markets whether the company can sustain growth at high levels.

Disney’s Parks segment

The performance of Disney’s Parks segment will also be crucial to watch. While the parks have reopened the rising coronavirus cases in the US could put the fragile recovery at a risk. Notably, Disney is a play on both the reopening story and is also a stay-at-home trade. While its Parks segment will benefit from the reopening, the streaming business could do better if lockdowns are imposed again.

DIS stock recent developments

Two of Disney’s recent titles “Black Widow” and “Jungle Cruise” performed well on the box office. Also, the streaming collections for both these titles looked promising. DIS has put streaming at the heart of its business as the company transforms into a streaming giant.

Disney stock forecast

Wall Street analysts are bullish on DIS stock. Of the 29 analysts polled by CNN Business, 23 rate the stock as a buy while five rate it as a hold. One analyst has a sell or equivalent rating on the stock.

Its median target price of $212.50 implies an upside of 20% over current prices. Its lowest target price is $147 which is a discount of over 17% while the highest target price of $230 is a premium of 30% over current prices.

Morgan Stanley issued a bullish note

Last month, Morgan Stanley reiterated its overweight rating on Disney stock. “Shares have lagged the market as lower than expected streaming net adds have outweighed significantly higher earnings. While near-term (FH21) consensus Disney Plus net adds appear optimistic, we remain confident in the ’24 streaming guidance and raise FY22 EPS estimates on rapidly reopening Parks,” it said in its note.

DIS expects the subscriber numbers to rise to between 230-260 million by the fiscal year 2024. After adding Hulu and ESPN+ subscribers, DIS expects to have been 300-350 million subscribers by then.

JPMorgan also sees the dip in DIS stock as a buying opportunity. “With its continued digital transformation and recovery at the legacy business, Disney remains our top pick in media in 2021, and we view current levels as a particularly favorable entry point for the long-term investor,” it said in its note.

Disney stock valuation

Disney stock trades at an NTM (next-12 months) EV-to-sales multiple of 4.86x. The multiple is slightly below its one-year average but above the five-year average of 3.6x. DIS stock has seen a valuation rerating over the last year amid the pivot towards streaming. Pure play streaming companies like Netflix attract a valuation premium over legacy entertainment companies. The stock’s valuation multiples look attractive and are supported by earnings rebound and the streaming transformation.

DIS stock technical analysis

Disney stock has found strong support at the 200-day SMA. It has also moved above the 50-day SMA which is a bullish technical indicator. The stock is now facing a resistance at the 100-day SMA which is currently at $180.13. If DIS stock can move above the 100-day SMA it would indicate technical bullishness.  The stock has a 14-day RSI (relative strength index) of 50.6 which indicates neither overbought nor oversold positions.

Disney shock was trading slightly lower in US premarket price action today. The 100-day and 50-day SMA would be crucial indicators to watch. However, from a long-term investment perspective, Disney stock looks like a good buy after the recent underperformance.

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