Wells Fargo revised up its 12-month price target on Walt Disney Co (DIS) from $182 to $201 and maintained an “Overweight” rating on the stock, as it projects success in streaming growth into next year.
Walt Disney shares closed higher for the fifth time in the past ten trading sessions in New York on Wednesday. It has also been the sharpest single-session gain since December 15th. The stock went up 1.82% ($3.10) to $173.55, after touching an intraday high at $175.94, or a price level not seen since December 14th ($177.28).
Shares of Walt Disney Company have risen 19.20% so far in 2020 compared with a 14.21% gain for the benchmark index, S&P 500 (SPX).
In 2019, Walt Disney’s stock went up 31.90%, thus, it again outperformed the S&P 500, which registered a 28.88% gain.
“Streaming is a competitive market and general entertainment is less in DIS’s power lane vs kids/family. Shortfalls in execution on streaming could leave DIS’s earnings depressed without the requisite multiple expansion,” Wells Fargo analyst Steven Cahall and team wrote in an investor note.
Wells Fargo values Walt Disney based on streaming subscribers and traditional businesses.
“This results in a $242bn streaming EV, or 978x CY22E subs vs 980x for Netflix. We think our EV/Sub framework is highly consistent. For traditional DIS we us 15x FY22E EBITDA for Parks, 10x for CP 6x for the rest of the traditional assets (e.g. networks, theatrical). Our traditional EV is $175bn of which $135bn is Parks/Experiences.”
Still, the pandemic will continue to be a factor to take into account.
“While 2021 looks likely to see a gradual return to normalized behaviors, there is still potential for risk. If vaccines do not provide a social gather panacea then DIS’s Parks business is back into risk management mode. There could also be a lingering recession that depresses discretionary spending on travel/leisure,” Cahall and team wrote.
Analyst stock price forecast and recommendation
According to CNN Money, the 25 analysts, offering 12-month forecasts regarding Walt Disney’s stock price, have a median target of $185.00, with a high estimate of $210.00 and a low estimate of $115.00. The median estimate represents a 6.60% upside compared to the closing price of $173.55 on December 23rd.
The same media also reported that at least 19 out of 28 surveyed investment analysts had rated Walt Disney’s stock as “Buy”, while 7 – as “Hold”.