While the company’s grander streaming ambitions hit a few snags, a trove of new content could propel shares in 2022.
The first episode of The Book of Boba Fett, a live-action Star Wars series on Disney+ that stars Temuera Morrison, dropped on Wednesday. The show follows the titular bounty hunter making his way across the galaxy. Investors hope such original content hitting Disney’s streaming services in the coming years can help spur growth.
Disney stock (ticker: DIS) was mostly flat on Wednesday, in line with the broader market. Shares are down 14% year-to-date, compared with the S&P 500 index’s 27% gains. It’s also the Dow’s biggest loser of the year, but whether that’s a positive or negative sign for 2022 depends on your sample, according to a note from Bespoke Investment Group.
The mean next-year change for the Dow’s biggest loser over the past 25 years is a gain of 12%, compared with a gain of 6.7% for the Dow’s biggest winner in the following year, according to Bespoke Investment Group. The biggest loser has seen positive returns 58% of the time in the 25-year period.
“While the 25-year performance shows that the Dow’s biggest losers have roughly doubled the performance of the biggest winners in the following year, it’s important to point out that the trend has reversed more recently,” Bespoke said in a note.
Starting with 2016, the best performer in the Dow has a following-year average gain of 42%. The biggest loser has only risen three times in the following year over the last eight years.
In November, the company reported slower-than-expected subscriber growth that sent shares tumbling. Still, the company maintained its fiscal 2024 target of up to 260 million subscribers on Disney+, up from 118 million in September. The stock’s bulls likened the short-term disappointment to Netflix (NFLX), which has in the past bounced back from temporary slowdowns in growth.
If you’re more concerned about estimates than historical trends: 21 of the 30 analysts listed by FactSet have a Buy or equivalent rating on Disney stock. The mean price target of $193.29 implies 24% upside from recent levels.
KeyBanc Capital Markets analyst Brandon Nispel, who has an Overweight rating and $216 price target on the stock, wrote earlier this month that the stock looks significantly undervalued.
“We believe DIS’s positioning in streaming is likely to drive multiple years of rapid growth, and profitability should improve as the Theme Park and Film businesses recover post-COVID-19,” he wrote. “This growth should more than offset pressure on legacy Media Networks, in our view, and makes DIS a leader in an evolving media landscape.”
The Book of Boba Fett, if received well by fans and critics, could help drive that growth. If not, there’s plenty more content on the way in the coming years, including a highly anticipated Obi-Wan Kenobi show starring Ewan McGregor.
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