Disney Stock Is a Buy, Analyst Say He Was Wrong for Making a Sell Call

Disney (NYSE: DIS) stock rallied sharply throughout the second half of the year despite more than a 50% drop in its parks and studio segment revenue.

Shares of the largest entertainment company grew 20% in fiscal 2020 and ended the year trading at an all-time high of almost $180 a share.

Walt Disney $DIS chart 20200111

Disney stock is up more than 100% from its 52-weeks low $85 level that it had in March. The massive share price rally has stunned investors because Disney is likely to post losses for 2020 and its revenues are expected to fall more than 30% from 2019.

Our Call Has Been Dead Wrong on Disney

The market analysts say they were wrong about Disney stock when it was hit harder by the pandemic early in 2020.

LightShed Partners, which provided a sell rating to Disney in 2020, now upgraded the stock rating to Neutral saying “our call has been dead wrong,

“At the time we focused on how the market under-appreciated the impact of COVID-19 on fiscal (September) 2020-2021 earnings. We knew numbers needed to come down significantly and expected the stock to follow, especially as leverage far exceeded historical norms. However, even 25 years into our analyst career, the market is still teaching us new lessons.”

The Streaming Business Supported Disney Stock Performance

Disney’s newly launched streaming business remained the bright spot and a key stock price driver in 2020.

Its Disney plus subscribers reached 73.7 million at the end of the September quarter compared to analysts’ expectations for 65.5 million.

Disney number of subscribers worldwide from Q1 2020 to Q4 2020

Disney number of subscribers worldwide from Q1 2020 to Q4 2020 – source: statista.com

The company expects subscribers to hit 230-260 million in the next four years. The company says they are expanding Disney pus services to many key regions in the days ahead to take advantage of increasing demand from streaming services.

However, Walt Disney stock is currently trading around 50 times to earnings and 4.95 times to sales ratio. Thus, many value investors suggest waiting for a better buying opportunity.

Siraj Sarwar - Lead Analyst
@tradethedayfx
Siraj Sarwar has been performing analysis on the stock market, equity research and general business consultation. He regularly contributes articles on economics, commodities, and equities to the world's leading websites, including Trade the Day, SeekingAlpha, TheStreet, and MSN.
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