Key points
- Disney shares continued to gain momentum from last quarter’s lows.
- There have been several updates to ratings and price targets this week.
- A new high price target of $140 indicates further upside of at least 15%.
- 5 titles we like more than Walt Disney
Despite a shortened trading week due to the long weekend, it’s already been a great week for Walt Disney Co. NYSE: DIS. As shares continue to rise from last October’s lows, it’s starting to look like the multi-month downtrend has been broken and the stock is in an uptrend.
Shares started this week up more than 45% from last quarter’s low, but have risen nearly 5% since Monday. Much of the additional momentum has come in the form of improvements and bullish comments from analysts, which can be among the best types of tailwinds a stock can get. And for those on the sidelines who think they’ve missed the boat with Disney, the company gives us several reasons to think this rally is just getting started.
The bullish momentum remains intact
Take Monday’s update from Barclays for example. The team raised their rating on Disney stock from Equal-Weight to Overweight based on what they called the “recent reset of the narrative.” Having weathered the worst storm in two years, Disney has emerged better and stronger, and the Barclays team expects this will soon be reflected in positive earnings revisions.
They also noted the ongoing boardroom drama between Disney leadership and investor Trian Fund Management. There is a key vote scheduled for next week, but amid the relentless stream of Disney-related updates leading up to the proxy vote, Barclays analyst Kannan Venkateshwar said investor focus remains constant.
Despite the negativity in the headlines, the sustained attention is expected to strengthen the stock’s performance in the short to medium term, driven primarily by positive indicators such as free cash flow exceedance and full fiscal year EPS projections . The steady stream of announcements following February’s bullish earnings report, coupled with investor confidence in future earnings estimates, will likely help keep Disney shares above the broader market for the rest of the year.
Price targets have increased
Barclays’ revised price target of $135 is not only more than 40% higher than the $95 they previously set, but points to further gains of more than 10% from the stock’s close on Wednesday. If Disney shares manage to rise towards that level in the coming weeks, they would be at new 52-week highs and well above the $126 level, where the stock’s previous best attempt to break the downtrend failed.
Given that Disney still has so much ground to cover to reverse the sell-off that began in 2021, this is a strong position to take, but Barclays is far from alone. On Tuesday, the Raymond James team reiterated its Outperform rating on Disney stock, and UBS Group did the same on Wednesday. Both teams increased their price targets on Disney shares at the same time, with UBS’s $140 now a high target indicating further upside of more than 15%.
Considering a position
Despite the challenges encountered during Disney CEO Bob Iger’s tenure, you can’t help but feel like the Disney narrative has effectively been restored. Several bullish catalysts lie ahead, including strategic partnerships for ESPN streaming and the consolidation of Hulu’s business. A renewed focus on operational efficiency and succession planning has clearly boosted investor confidence, and there is every reason to believe that the bullish momentum seen in stocks so far this year is expected to continue.
With the stock’s Relative Strength Index (RSI) currently at 78, there are some signs that Disney stock is a bit overheated, so investors should factor that into their planning. But considering just last week’s updates, any dip could be seen as an entry opportunity as Disney gets back to doing what it does best: rallies.
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