(Bloomberg) -- Even as Walt Disney (NYSE: DIS ) Co.’s stock heads for its biggest annual drop in at least 47 years, analysts are clinging to their price targets for the media giant, betting that it can avoid the loss of streaming-video subscribers that’s crushed rival Netflix Inc (NASDAQ: NFLX ).’s share price.
Analysts expect the stock to rise by 65% in the next year, based on the average target compiled by Bloomberg. Underpinning their optimism: Disney’s streaming unit still has room to grow and, unlike Netflix, the company has businesses such as theme parks that are set to rebound now that pandemic lockdowns have ended in the U.S. and Europe.
Collectively analysts have predicted such a big gain only one other time, when Disney plunged at the outset of the pandemic in March 2020. That drop happened so quickly that brokers had little time to adjust their models. This year, however, the stock’s 30% drop has been more gradual and brokerages have largely held on to their targets.
Now the next catalyst for the stock comes as the company reports earnings after markets close Wednesday. With Netflix shocking Wall Street last month with its first customer decline in more than a decade, investors will be keen to see if the Disney+ streaming service will face similar issues and hit a subscriber wall.
Analysts predict Disney+ had 134.4 million subscribers in its fiscal second quarter, up 3.5% from the first, with growth forecast to accelerate in the second half.
“The industry’s streaming dreams may be losing their luster, but Disney+ could shine with content and scale that outperforms, especially with a new ad-supported tier, ” Bloomberg Intelligence senior analyst Geetha Ranganathan said. The company is likely to add 40 million subscribers this year thanks to “a steady pace of new titles, local content and added markets.”
The Hollywood studio’s stock got a boost during the pandemic-induced lockdowns as Disney+ attracted millions of new customers. Now with economies opening up and travel recovering, the company is also being benefiting from its theme park business rebounding.
To be sure, analyst optimism on Disney hasn’t paid off lately. The stock has slumped 47% from March 2021 high and this year is on track for its biggest drop since at least 1975. And it may be that their price targets are so bullish now only because analysts missed the decline in the stock and are late in catching up to it.
In addition to concern about a streaming slowdown, investors are already wondering how long the good times can last for the theme parks given that recession fears are mounting.
“We think sentiment on both is overdone,” Steven Cahall, a Wells Fargo & Co. analyst who sees the stock gaining 69% in the next year, said in a note.
Disney’s diversified business has helped the stock avoid the violent selloffs that have rocked former stay-at-home favorites like Netflix, Peloton Interactive (NASDAQ: PTON ) Inc. and Zoom Video Communications (NASDAQ: ZM ) Inc., which have fallen between 75% and 92% from their peaks.
Tech Chart of the Day
There’s something about May: The Nasdaq 100 Index has had a rough start to the month, with 36 stocks hitting 52-week lows in the first seven sessions, and there are still more than two weeks to go. Last year was similar, with more than two dozen 52-week lows in May.
Top Tech Stories
- Three years after US officials sounded the national-security alarm about Chinese-made telecommunications equipment, the technology remains in place throughout America — including in some surprising places
- Panasonic (OTC: PCRFY ) Holdings Corp. said it plans a potential stock market listing for its supply chain management arm, as it seeks to increase the independence of its operating businesses
- Electronic Arts Inc . (NASDAQ: EA ) reported revenue for the current quarter that missed analysts’ estimates, as the video game publisher continues to feel the effects of an industry-wide downturn and the flop of last fall’s Battlefield game
- Globalfoundries Inc (NASDAQ: GFS ), the biggest U.S.-based provider of made-to-order semiconductors, posted quarterly sales and profit that topped analysts’ estimates, a sign it’s benefited from industrywide shortages
- Roblox Corp (NYSE: RBLX ), a video-game platform aimed at preteens and teenagers, reported bookings that declined from a year ago and missed analysts’ estimates, continuing a trend that saw the time players spent on the platform growing slower than during the pandemic
- Unity Software Inc (NYSE: U ) shares slumped as much as 30% in U.S. premarket trading after the 3D game-development company gave a second-quarter revenue forecast that was weaker than expected
- Twitter Inc (NYSE: TWTR ) was “foolish in the extreme” in kicking former US President Donald Trump off its service and his permanent ban should be ended, said Elon Musk, the billionaire who has agreed to acquire the social media company
- Traders are the most skeptical they’ve ever been about whether Elon Musk will actually complete his proposed purchase of Twitter Inc. The spread on the deal, which offers an indication of how much Wall Street believes the takeover will be completed, jumped to $6.94 on Tuesday -- the widest since the billionaire launched his bid
©2022 Bloomberg L.P.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.