Posted on August 20th, 2018
Walt Disney Co.’s (DIS) stock has surged since the middle of June by more than 13 percent, as investors begin to focus on the company’s direct to consumer streaming media future. Hedge Funds were buying shares of Disney during the second quarter making the stock the third hottest stock among the 150 hedge funds WhaleWisdom tracks for its heat map. As a result, WhaleWisdom added the stock to its WhaleIndex 100.
Disney plans to release a streaming service later in 2019 to compete against Netflix Inc. (NFLX) and Amazon.com Inc. (AMZN). In preparation for the release of that service, the company has strengthened its current content library by acquiring assets from 21st Century Fox (FOX) for more than $71 billion, including the movie studio.
The Heat Map
The stock’s ranking moved significantly higher during the second quarter on the WhaleWisdom Heat Map rising to 3 from its previous position at 39. As of the completion of the second quarter, 33 different hedge funds held the stock in their portfolios, and in 3 cases it was among the top ten holdings.
Adding Across Funds
It wasn’t just the top 150 funds WhaleWisdom tracks for the heat map; other funds were starting new positions or adding shares of Disney to their holdings. During the quarter the number of aggregate 13F shares held among hedge funds increased by more than 11 percent, with 75 funds adding to existing positions, while 35 created new ones. Meanwhile, 60 funds reduced their holdings, while 18 exited.
Analysts Have Doubts
Analysts do not share the same bullish sentiment for the stock, like investors. Analysts have reduced their earnings and revenue growth forecast for the company. Estimates are forecasting growth of 24 percent in fiscal 2018, slowing to just 6 percent in 2019 and only 2 percent in 2020. Revenue forecasts aren’t much better over the next couple of years, slowing from 7 percent in 2018, to 3 percent in 2019 and 4 percent in 2020.
Not Much Upside
The average price target on the stock has increased to nearly $119 since mid-June from roughly $116, earlier this year. However, that also suggests that analysts do not see much upside in the stock from its current price of approximately $112.50.
The divergence between investors and analysts is glaring. For Disney’s stock to keep rising investors will need to continue looking to Disney’s future and the significant opportunities the streaming service might be able to generate. If not, then hedge funds may start rushing for the exits.