The Disney Stock Forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

• I Know First has a bearish one-year forecast for Disney’s stock. This is likely due to the pandemic-related shutdown of Disneyland & Disney World parks.
• Another headwind is the postponement of movie releases. No major movie franchise title releases mean lower merchandise licensing revenue.
• My takeaway is the pandemic-induced negative YTD performance of DIS gave us a cheap buy-in window.
• Yes, sir, DIS a strong buy right now for long-term investing purposes. Content is king and Disney is the king of entertainment content.
• The success of Disney+ streaming service is another reason why we should keep our faith on Disney.

We went long on Disney (DIS) because we loved its invidious status as king of entertainment. No doubt this company’s stock was greatly punished by the pandemic-induced sell-off. DIS touts a minus 30% YTD return. This blue-chip is now much cheaper to own. If you have the extra cash, adding more Disney shares is a judicious and timely move right now.

Due to the huge drop in its trading price, DIS is now even more affordable when compared to Netflix (NFLX) or Amazon (AMZN). Down -30% for the year, DIS is now only valued at 2.33x Price/Sales and 18.03x TTM P/E GAAP. The obvious undervaluation or under-appreciation of Disney compared to its peers is not going to last forever. Months from now, more institutional investors, mutual funds, and hedge fund managers will again increase their position on Disney.

Disney Is Big And Healthy, It Can Overcome This Pandemic

The healthy balance sheet of Disney means it can overcome this pandemic. After buying Fox Studios for $71 billion last year, Disney still ended Q4 2019 with more than $6.83 billion in cash & short-term investments. The investors who dumped their DIS holdings due to the shutdown of Disney’s parks (because of COVID-19) did not take into consideration that the company is cash-sturdy. Disney has lots of cash and a steady cash flow. These two qualities are strong anti-pandemic medicine for any company. Disney won’t go bankrupt just because its parks will remain closed for 2 or 3 months.

Disney is cash-rich enough that it could also afford to postpone the theatrical release of cash-cow movie franchises like Black Widow, Mulan, and New Mutants. This rescheduling of movie releases is painful. No new Marvel-level movies mean less merchandise licensing revenue for Disney. Two-quarters of weakened revenue from two segments (Studio Entertainment and Parks, Experiences & Products) is not going to be fatal to Disney.

The pandemic-related park closure and delayed movie releases would probably cost Disney $7 billion in lost revenue this year. Disney’s TTM revenue is more than $75 billion. A loss of less than 10% in annual revenue still does not justify the -30% YTD return of DIS. This stock was clearly oversold by pandemic-panicked investors. Buying oversold stocks is a good way to make money.

Stay Positive and Opportunistic, Exploit This Bottom-fishing Opportunity

The COVID-19 pandemic is still spreading around the world. However, Disney’s predicament is just near-term.  Disney World and Disneyland parks will re-open this year. Movies will get released in the second half of 2020. This pandemic is just a temporary headwind for Disney. This is especially true when you consider that Hollywood stars, doctors, scientists, and billionaires are now collaborating in the hunt for a cure and vaccine against SARS-COV-2 (the novel coronavirus that causes COVID-19 illness).

Two or three months from now, the bulls will again rally behind Disney. Go contrarian and buy Disney shares right now. DIS is attractively priced and investors’ sentiment is slowly reversing. The recent announcement that Disney+ has attracted 50 million subscribers helped boost the stock yesterday. Disney+ is a certified success because it attracted 50 million subscribers in just 5 months is it launched.

The quarantines around the world that forced billions of people no doubt helped boost Disney+ subscription. Disney+ launched in India just as that country went to full COVID-19 lockdown. Disney+ attracted 8 million subscribers in locked-down India. If India extends its 21-day lockdown (like the Philippines did), we can expect Disney+ to attract another 4 million or more new subscribers in India.

The $20/year Disney+ pricing for India is just brilliant. Hundreds of millions of quarantined people in India can certainly afford $20/year. Disney+ can replicate Netflix’s international success if it also extends the $20/year offer to other Asian and Latin American markets.

The rapid rise in Disney+ subscription is akin to what gave NFLX super-high valuation ratios. Consequently, Disney+ might just be what investors are waiting for before they raise their appreciation of DIS. It will be an obnoxious injustice if DIS continues to trade at 2.33x Price/Sales ratio while NFLX touts over 8x Price/Sales valuation.

My fearless stock market forecast is that DIS could trade above $150 again if Disney+ announces 100 million paid subscribers.

Conclusion

Disney’s stock is one of the bearish Coronavirus stock picks on one-year forecast from I Know First but I still recommend it as a strong buy. I am putting my natural intelligence over the artificial intelligence algorithm of I Know First. Twelve months from now, I bet Disney will most-likely trade at over $140.

Although my buy rating bets against negative technical indicators, I believe that extraordinary times require extraordinary approach to analyzing stocks and my stock trading intuition and analytical experience favors this market opportunity. This stock was oversold but with obvious upside potential. Trust me, Disney will emerge stronger and more profitable after this pandemic is over.

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Past I Know First Success with Disney Stock Forecast

I Know First has been bullish on Disney stock in the past forecast. On April 24, 2019, the I Know First algorithm issued a bullish quant trading forecast for Disney. By the three months horizon, the algorithm successfully forecasted the movement of the DIS’s shares.

This bullish Disney stock forecast was sent to the current I Know First subscribers on April 24, 2019.

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Please note-for trading decisions use the most recent forecast.