Despite having its theme parks shuttered or vacant for most of FY20, Disney’s (DIS) streaming service, Disney+, had been keeping the company afloat, with subscription numbers soaring during that time. However, on May 14, Disney released numbers which indicated a deceleration in subscriber growth for Q2FY21. Despite this drop, Steven Cahall of Wells Fargo remains bullish on the stock.
Cahall maintained a Buy rating on the stock, although he lowered the 12-month price target from $219 to $209. Disney currently trades at $169.68, indicting a potential upside of 23.17% if this target were to be met.
Disney+ subscriptions were estimated to hit 11 million in Q2, but reached only 9 million. Cahall, though, remains unfazed by the miss, because Disney’s theme parks are now seeing a sharp rise in attendance along with the fading of the COVID-19 pandemic in developed countries. Additionally, he notes that there will be a “pick-up in content” creation for Disney+, as production crews get rolling again after a multi-month hiatus.
Expounding on the slowdown in Disney+ subscriber growth, Cahall says there is “a bit of consternation around guidance, but we’re not worried.” Disney+ guidance was reaffirmed for FY24, but investors did express some concern as this was the only piece of guidance reaffirmed during the May 13 earnings call.
Cahall expects the stock to “pull-back and hang out for a bit” but also sees it as a good time to pick up more shares.
Other analysts were not as forgiving, like Doug Creutz of Cowen and Co., who wrote, “Disney+ needs to add an average of at least 9 million subscribers per quarter for the next 14 quarters to reach management’s targets, and as the service gets more penetrated, the pace of adds is likely to slow down.” Creutz has a much more pessimistic estimate on Disney, with a price target of only $147 (13.36% downside potential).
According to TipRanks, Disney remains a Strong Buy, based on 21 analyst ratings from the last three months. Additionally, the average analyst price target of $209.89 implies 24% upside potential. (See Disney stock analysis on TipRanks)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.