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

The Walt Disney Company (DIS) stock rose sharply yesterday after its new movie “Black Widow” created a new post-pandemic record. The stock is, however, up only about 4% in 2021 and is underperforming the S&P 500 which is near record highs.

Disney stock is down over 9% from its 52-week highs. What’s the forecast for DIS stock and is it a good buy in July 2021 considering the reopening and the continued traction in its streaming business?

Disney stock technical analysis

Disney stock is looking bullish on the charts. It is trading above the 30-day, 50-day, 100-day, and 200-day SMA (simple moving average) which is a bullish indicator. The stock was facing resistance at the 50-day SMA which it has successfully managed to breach. The 12,26 MACD (moving average convergence divergence) also gives a buy signal. Looking at the technicals, DIS stock looks in a near-term uptrend. The 14-day RSI (relative strength index) meanwhile is at 65.4 which is getting near the overbought territory. RSI values above 70 signal overbought levels.

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DIS stock recent developments

Disney’s “Black Widow” grossed $80 million in its opening weekend in Canada and the US. It generated another $78 million from overseas sales. However, in what looks like an encouraging sign for Disney’s streaming strategy, the title earned another $60 million in streaming where users paid $30 to watch the movie.

Disney’s streaming platform

Last year, Disney outlined aggressive plans for its streaming service. Its subscriber numbers have been growing fast and it had 103.6 million paying subscribers in the most recent quarters. The subscriber number however fell short of the 109 million that markets were expecting. Meanwhile, the company expects Disney+ subscriber numbers to triple by fiscal 2024 and rise to 230-260 million. After accounting for ESPN+ and Hulu subscribers, DIS expects to have been 300-350 million subscribers by then.

Streaming services

Competition has been intensifying in the streaming industry and most legacy media companies are focusing on streaming. The increasing penetration for streaming companies is also a risk for cinema chain companies like AMC Entertainment whose stock price has risen sharply in 2021 amid buying interest from Reddit traders. AMC is now majority-owned by retail traders and they even blocked the company’s share issuance plan assuming the role that was hitherto reserved for activist and institutional investors.

Disney stock price forecast

Coming back to Disney, its median target price of $212 is a premium of almost 15% over current prices. The lowest target price of $147 is a 20% discount while the highest target price of $230 is a premium of almost 25% over current prices. Of the 30 analysts polled by CNN Business, 23 rates DIS as a buy or some equivalent while six rates them as a hold. One analyst has a sell rating on DIS stock.

JPMorgan is bullish on DIS stock

Earlier this month, JPMorgan reiterated DIS stock as a top pick. “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,” said JPMorgan analyst Alexia Quadrani.

She added, “Disney continues to see improvements at the parks with domestic capacity likely reaching normalized levels in FQ4. Demand remains robust, with customers’ intent to visit the parks returning to 2019 levels at Walt Disney World, a strong sign for the coming quarters.”

DIS has two growth engines

Notably, DIS stock has two growth engines. One is the digital transformation that will help contribute to the company’s earnings in the medium to long term. The second near-term growth driver is the reopening of its theme parks in the US. With a sizeable pent-up demand for outdoor entrainment, the Parks segment is expected to report a rebound in earnings. Currently, the parks are operating at reduced capacity but they should revert to normalcy given the COVID-19 vaccinations. While the Parks segment will support the earnings recovery, streaming will help in lifting Disney’s valuation multiples.

Disney stock valuation

Disney stock currently trades at an NTM (next-12 months) PE multiple of 49.5x which is way above the 10-year average of 29.5x. That said, there are reasons behind the elevated valuation multiples. Firstly, the company’s earnings are depressed in the near term as the Parks segment is still not operating at full capacity. Secondly, it has seen a valuation rerating amid the pivot towards streaming. The streaming service will contribute significantly to the earnings in the long term.

Should you buy DIS stock?

DIS looks like a good stock to buy and bet on the company’s transformation to a streaming giant. Also, it is a reopening play. The valuations don’t seem too high and the recent correction in the stock looks like a buying opportunity. In the medium term, investors might also be rewarded with the restoration of dividends that Disney had suspended in 2020 as the COVID-19 pandemic took a toll on its earnings.

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