During Disney’s most recent Investor Day conference, we got to hear about TONS of new shows and movies coming to Disney+ or theaters in the next few years.
And while Disneyland and some of Disney’s other theme parks around the world are currently closed, Disney World and other Disney theme parks are currently open. Taking all of this into account and with news of vaccines already starting to be distributed in the United States, one analyst has upgraded his rating of Disney’s stock.
According to MSN, UBS analyst John Hodulik has upgraded his rating of the Walt Disney Company stock from “neutral” to “buy” in a recently issued report. In the report, Hodulik notes Disney’s streaming success and argues that the Disney theme parks will benefit from the reopening of the economy after the COVID-19 pandemic.
A stock upgrade like this typically means that the analyst has become more optimistic about how the stock will perform. In the report, Hodulik also boosted the stock price target from $155 to $200. He predicted that there would be “continued outperformance” with Disney’s streaming business. Hodulik noted, “Disney is positioned to achieve scale similar to industry leader Netflix with 340 million-plus global subs by ’24…while its premium intellectual property creates pricing power and enables the company to spend less per sub on content, driving better economics over time.”
Hodulik also estimated that Disney will reach direct-to-consumer revenue of $43 billion in fiscal year 2024, and achieve profitability in fiscal year 2023. Disney previously noted that it would have higher content expense in 2024 than anticipated, but expected Disney+ to be profitable in fiscal year 2024. It seems this analyst is predicting profitability may come slightly sooner than that.
In terms of the theme parks, Hodulik said that he expects the theme parks will become a “beneficiary of vaccine availability and pent-up demand for leisure travel in the second half of 2021.” He noted that we will see improved attendance as the vaccine becomes more widely distributed. He also expects that the parks could approach their historical performance and attendance by Fiscal Year 2022, with potentially higher margins long-term given some improvements made during the pandemic.
We’ve got our own thoughts on why the vaccine actually might NOT be the cure that Disney World needs. But, only time will tell how quickly we’ll start to see the impact of vaccine distribution on attendance at the Disney parks.
Hodulik also said that UBS data suggests that attendance at the parks has “ramped to the self-imposed 35 percent ceiling.” Disney increased its capacity to 35% last year, and did note that one holiday weekend was nearly full in terms of its capacity. We saw some big crowds at Disney during the holidays, but the crowd levels have been VERY low recently. We’ve even seen reservations for popular spots have openings.
But, things could certainly change in the future.
We saw Disney stock SOAR last year after the Investor Day conference. On December 11th, the stock value was valued at around $178.16, according to Google Finance. At the moment, the stock is trading at around $172.68. So, while the value has dropped slightly, it still has remained quite high.
Disney is set to hold its next quarterly earnings call in February, where we’ll get updates as to the financial status of the company. We’ll be interested to see what information Disney shares then and how those updates affect its stock value. We’ll keep you updated on all the latest!
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