The Walt Disney Co. (DIS) continues moving forward while slightly underperforming the S&P 500. The family entertainment and media company’s stock rose by approximately 22.9% as of September 30, 2021, compared to the S&P’s gain of about 36.2% since the start of 2020. However, while Disney’s growth may have temporarily fallen behind, it was recently added to the WhaleWisdom Whale Index 100 on August 17, 2021.
Disney represents an international family entertainment and media enterprise made up of multiple subsidiaries and affiliates. Often thought of for its fairytale movies, theme parks, and resorts, Disney’s entertainment options also include general entertainment and sports, cruises, and a successful Disney+ on-demand streaming service. The company’s business diversification has been helpful during the coronavirus pandemic. Disney’s theme parks were forced to close several times during the pandemic, cruise ships docked, studio production halted, and hotel reservations down. During this time, the company saw skyrocketing demand for its Disney+ service as families sought entertainment from the safety of their homes during stay-at-home government orders. However, all of Disney’s theme parks have since reopened gates, many of its cruises have resumed, movie theatres are slowly reopening, and even Disney’s ESPN Wide World of Sports experience relaunched in time for soccer season. As the travel industry’s rebound has a positive impact on Disney’s business, the appeal of Disney+ continues as well.
Hedge Funds Are Selling
Despite Disney’s overall year-to-date growth, hedge funds were actively selling the stock in the second quarter, and the aggregate 13F shares held by hedge funds decreased to approximately $243.9 million from $254.9 million, a decline of about 4.3%. Overall, 29 hedge funds created new positions, 220 added to an existing ones, 66 exited, and 176 reduced their stakes. Institutions slightly increased their aggregate holdings by about 0.1% to $1.2 billion. The 13F metrics between 2001 and 2021 reflect Disney’s rising stock price and demonstrate the potential for the stock to continue a forward trend.
Analysts expect an increase in revenue in 2020 and 2021, bringing revenue to approximately $67.7 billion by September 2021 and about $84.8 billion by September 2022. Earnings are forecast to rise to $4.99 in 2022 from an estimated $2.50 in 2021.
Analysts Note Slower Subscriber Growth
Top analysts may give Disney different ratings, but one thing most have in common is the acknowledgment that despite its popularity, Disney+ subscriber growth has slowed. BofA Securities analyst Jessica Reif Ehrlich lowered her expectations for fourth-quarter subscriber growth but maintained long-term estimates and reiterated a Buy rating for the stock and a $223 price target. Wells Fargo cut its price target on Disney to $203, down from $216, warning of slower subscriber growth. Analyst Brandon Nispel of KeyBanc Capital Markets Inc. had an Overweight rating on the stock and appeared to maintain confidence in long-term subscriber growth trends.
Optimism Beyond 2021
While 2020 and 2021 have included challenging months for Disney due to the pandemic, analysts remain optimistic for the future with encouraging earnings estimates through to 2022. Consumer interest in travel is returning, and it seems inevitable that demand for Disney’s travel destinations and entertainment sources will return to pre-pandemic levels. This entertainment and media giant holds promise beyond 2021 for patient investors.