Source: PaxForex Premium Analytics Portal, Fundamental Insight
2022 was a very difficult year for Walt Disney Company investors. The media giant's stock is down 46% in 2022. Can the House of Mouse catch up in 2023?
The first major change by analysts on Disney this year may not seem very comforting at first glance. Tim Nollen of Macquarie is lowering his price target on the stock from $120 to $110. The near-term target continues to move in the wrong direction, but it's worth noting that the stock has been closing in double digits for the past eight weeks. The new target is still 24% higher than Disney stock closed Tuesday. Nollen continues to tag Disney stock with a bullish "outperform" rating.
Nollen thinks Disney stock could bounce back from its brutal 2022 results, especially if returning CEO Bob Iger can implement his plan to rebuild Disney+ and the company's other consumer-focused media areas. It's not all positive. The Examiner is lowering its near-term estimates amid weakness in the advertising market.
Just two months ago, Nollen lowered his target stock price from $140 to $120 following Disney's troubled fourth fiscal quarter results. Disney's $1.5 billion operating loss in its streaming business was an obvious plot twist. The same Disney+ that investors hailed for its initial growth two years earlier has turned into a profit-absorbing albatross. A disruptive platform that was seen as a genius by Wall Street in the early stages of the pandemic is now largely seen as a mistake. The number of subscribers was growing, but even in the U.S., the average revenue per user was declining.
Nevertheless, there is still reason for hope. Last month there was a 38% increase in the price of the free Disney+ offer. This is likely to increase churn, but it should strengthen the case for the viability of the platform. This increase was accompanied by the launch of an ad-supported version at the old price, giving viewers the opportunity to save money without giving up the premium streaming service. At the very least, average revenue per user should finally start rising in the coming quarters.
Disney theme parks were one of the few positives in Disney's latest report, and this segment appears to be wrapping up a very strong performance during the seasonal holiday season. Disney also ended the year with another major theatrical release, Avatar: The Way of the Water. The film approached $1.5 billion worldwide in its first three weeks of release. There may be long-term concerns about the multiplex industry, but Disney ended 2022 with three of the four highest-grossing films in the U.S. market.
There are some serious concerns about Disney's legacy media network business. Advertisers are beginning to slash their marketing budgets, and the secular decline in cable and satellite subscriptions continues. With Disney getting so many new viewers through Disney+, Hulu, and ESPN+, all will be well on that front if only the company can cut its losses.
Disney has many constituent parts, which is true for most media company stocks. It doesn't need to be operating at full capacity to shift. Even if it succeeds in only some of the areas suggested by Iger, it will be enough to get Disney stock back into the triple digits.
As long as the price is below 97.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 91.76
- Take Profit 1: 86.00
- Take Profit 2: 77.00
Alternative scenario:
If the level of 97.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 97.00
- Take Profit 1: 101.00
- Take Profit 2: 108.00
