The Walt Disney Company (NYSE: DIS) shares have found strong support above $160, and according to technical analysis, bulls remain in control of the price action.
Fundamental analysis: UBS sees Disney well positioned for the next stage of the recovery
Theme parks show signs of recovery, trends are improving, and many analyst firms point to more upside potential for this company’s share price. UBS sees Disney well positioned for the next stage of the recovery and assigned a buy rating as park attendance continues to normalize. Morgan Stanley also assigned a buy rating on Disney with the price target at $210, while analyst firm Wolfe Research increased its target to $226.
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Bob Chapek, Chief Executive Officer of Walt Disney, said last week expects that he remain very optimistic about the company’s outlook. As COVID-19 case counts continue to drop, it will drive significant margin expansion and hyper-growth in its top and bottom lines.
Walt Disney reported its second-quarter results in the second week of May; total revenue has decreased by -13.3% Y/Y to $15.61 billion, while the GAAP EPS was $0.50 (beats by $0.44). Total revenue has decreased above the expectations (-$320 million) mainly due to the Covid-19 pandemic as a result of the closures and reduced operating capacities.
Disney Parks, Experiences, and Products revenues for the quarter decreased 44% to $3.2 billion, and segment operating results decreased $1.2 billion to a loss of $406 million. The positive fact is that diluted earnings per share from continuing operations for the quarter increased to $0.50, and the company’s management expects that the business will continue to improve in the upcoming quarters.
“We’re pleased to see more encouraging signs of recovery across our businesses, and we remain focused on ramping up our operations while also fueling long-term growth for the company. This is clearly reflected in the reopening of our theme parks and resorts, increased production at our studios, the continued success of our streaming services, and the expansion of our unrivaled portfolio of multi-year sports rights deals for ESPN and ESPN+,” said Bob Chapek.
Walt Disney’s size will always attract potential investors; still, the stock’s current price does not reflect the company’s fundamental background. Walt Disney trades at more than forty times TTM EBITDA, the book value per share is around $47, and the company’s business will be affected by the COVID-19 pandemic certainly next several quarters.
Technical analysis: Bulls remain in control of the price action
The important support levels are $170 and $160; $180, $190, and $200 represent the resistance levels. If the price jumps above $190 resistance again, the next target could be around $200. On the other side, if the price falls below $160, it would be a firm “sell” signal, and we have the open way to $150.
Summary
Theme parks show signs of recovery, trends are improving, and many analyst firms point to more upside potential for Walt Disney’s share price. The stock’s current price does not reflect the company’s fundamental background; still, if the price jumps above $190 resistance again, the next target could be around $200.
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