Disney: Fret not, despite Stock Stalling

© Reuters. Disney: Fret not, despite Stock Stalling

As the Delta variant of COVID-19 provides another wave of concern for investors, even the best stocks are getting swept up in the volatility. High-quality blue chip companies such as The Walt Disney Company (NYSE:DIS) once again appear to be in no man’s land.

Indeed, the pandemic provided a sharp hit to Disney's revenues. This is a company that creates amazing in-person experiences for its clientele. The company's parks, hospitality, and cruise businesses all saw dramatic declines toward zero last year, as pandemic-related restrictions took DIS stock on a wild ride.

However, as a pandemic reopening play, DIS stock has rightly surged. The company's well-timed introduction of its Disney+ streaming platform has helped tide the company over until now.

I remain bullish on Disney's long-term prospects. Perhaps the key reason for that is this company's long-term cash flow growth potential. Disney has one of the best brands in the world, an intangible asset that's hard to value.

Right now, it's easier to make the argument that DIS stock is fairly priced. After all, this is a stock that has underperformed the broader indices since last year.

That said, a robust earnings report has stoked enthusiasm among investors, leading to a resurgence in DIS stock over the last month. (See DIS stock charts on TipRanks)

Let's dive into whether this surge can continue.

Path to Major Profitability

All eyes were on Disney's PEP (parks, experiences, and products) segment this past quarter. After all, this has been a key sector that investors have watched to see if the worst is over with respect to the pandemic.

In this regard, Disney blew its earnings out of the park (no pun intended).

The company reported revenue of $4.34 billion, and an operating profit of $356 million in this segment this past quarter. The fact that PEP was in the black was a surprise to many investors.

Additionally, the company brought in impressive revenue in its Media division, boasting wins at the box office for a number of high-profile new movies.

However, following an immediate surge post-earnings, DIS stock has waned somewhat. Many investors have scratched their heads as to why this is. It appears broader market sentiment related to the potential for more shutdowns is at play with DIS stock.

Will momentum pick up again? We'll have to wait and see. However, it appears DIS stock remains in a strong position right now.

Barring any additional restrictions imposed on its pandemic-sensitive businesses, the recovery is on. It just seems the market isn't so sure that's the case right now.

Wall Street's Take on DIS Stock

As per TipRanks' analysts rating consensus, DIS stock is a Strong Buy. Out of 19 analyst ratings, there are 16 Buy recommendations, and three Hold recommendations.

The average DIS price target is $217. This figure lies between a low of $185 per share, and a high of $263 per share.

Bottom Line

Disney has shown that the negative impacts of the pandemic are diminishing over time. In the view of many long-term investors, Disney is a company that stands to outperform from here.

However, this company isn't out of the water yet. Rising Delta variant cases have muddied the discussion on Disney stock.

That said, looking at Disney through a long-term lens, it's hard to make the argument that this company is in significant trouble.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

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