Source: PaxForex Premium Analytics Portal, Fundamental Insight

The Walt Disney Company, one of the leading names in the entertainment industry, lost 15% of its value last year. The fourth-quarter financial results, which disappointed Wall Street, certainly didn't help. Still, analysts are optimistic about the company's stock, averaging a 12-month price target of $198. That's 31% above its current level.

Are you considering investing in Disney stock right now? If so, considering the "bulls" and "bears" arguments will help you make a more informed decision.

First of all, let's look at the "bulls" argument. The world is opening up again - at least in parts and little by little - and that's good for Disney. The last quarter was the first time since the pandemic began that all of its theme parks were open. As a result, the Parks, Entertainment, and Products segment doubled revenues from a year ago to $5.5 billion and posted an operating profit of $640 million. Clearly, consumers' appetite to get out into nature and spend money on entertainment is back. In addition, Disney theme parks have pricing power, which is a key signal of competitive advantage.

Another reason you may want to invest in Disney is the success of its direct-to-consumer business. After launching in November 2019, the Disney+ streaming channel now has 118 million subscribers, which is an incredible achievement. It took Netflix 10 years to reach the same level. Looking ahead, management expects Disney+ to have 230 to 260 million subscribers by the end of the fiscal year 2024, the same year the service is expected to become profitable.

Finally, when discussing Disney's investment merits, the company's valuable intellectual property cannot be ignored. Its ability to monetize its various characters and storylines, whether in theme parks, on a streaming service, or through merchandise, shows that the power of the Disney brand is unparalleled. CEO Bob Chapek is committed to creating his own Disney meta-universe. The ability to connect the physical and digital worlds through new technology will help Disney connect more deeply with its fans. And that, of course, could lead to more revenue.

On the other hand, there are some important risks investors should think about before adding Disney stock to their portfolios. For starters, Disney+ growth seriously disappointed in the last quarter, adding just 2.1 million new subscribers. That was the main reason the stock fell after the financial results were released. And with many Disney+ customers using cheaper Hotstar plans in India and Indonesia, average revenue per user continues to decline each quarter. Disney+ will continue to spend money for several more years.

Moreover, the world is a long way from leaving the pandemic behind. The recent spike in incidence is a stark reminder that there is still much work to be done to return to normalcy. Not surprisingly, it is harming theme parks and cruise ships, which are just beginning to gain momentum in the second half of 2021. The COVID-19 Omicron option is forcing people to change their travel plans. And Hong Kong's Disneyland will be temporarily closed as there has been a spike in illnesses. Disney has to deal with the uncertainty of a pandemic all the time.

Finally, Disney has not been a winning investment in recent years - it has not outperformed the S&P 500 in the last one, three, five, and ten years. From the fiscal year 2014 to the fiscal year 2019 (excluding the impact of the pandemic), sales and net income grew only 42.6% and 47.4%, respectively. Such fundamentals are no guarantee of growth in the stock. Management needs to prove that Disney's focus on the "direct-to-consumer" business will be fruitful in the long run.

Investors should now be armed with some additional knowledge that they may need to analyze Disney stock more closely. It seems that the arguments of the bears are stronger than those of the bulls, and for this reason, traders should refrain from buying Disney stock.

As long as price is above 134.06, follow the recommendations below:

• Time frame: D1
• Recommendation: long position
• Entry point: 137.70
• Take Profit 1: 141.20
• Take Profit 2: 147.26

Alternative scenario:

If the level of 134.06 is broken-down, follow the recommendations below:

• Time frame: D1
• Recommendation: short position
• Entry point: 134.06
• Take Profit 1: 129.00
• Take Profit 2: 123.50