Media

The 2016 Bullish and Bearish Case for Disney

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Walt Disney Co. (NYSE: DIS) has been a top-performing Dow stock for years, and it seems like this company can do no wrong, the way that it left 2015. Disney would have had a truly outstanding performance on the year if not for the sell-off in August, when the stock lost about 20%, but it was still incredibly positive on the year. Last year was an interesting one for Disney, to say the least, with the advent of “Star Wars: The Force Awakens” and dealing with the challenges of cord-cutting millennials.

24/7 Wall St. wanted to see what the strategists and analysts on Wall Street expect for the stock market in 2016. It turns out the bull market was interrupted in 2015 as the Dow Jones Industrial Average closed out the year down 2.2% to 17,425.03. That may be hardly a reason to call a bear market ahead, but it is after six straight years of gains.

While the index performance of the Dow does not account for individual stock dividends, Disney ended 2015 at $105.08, for a gain of 12.9%, including its dividend adjustments.

For the year ahead, the consensus analyst price target from Thomson Reuters is $118.24. If the analysts are correct, the expected total return for Disney would be 13.9%, including its dividend yield of 1.35%.

2016 has gotten off to a very bumpy start, and Disney shares were at $100.65 after only a few days of trading.


“Star Wars: The Force Awakens” has been a definite boom for Disney, which was one of the strongest Dow stocks last year. This movie is breaking literally all the box office records and is on track to dethrone “Avatar” as the highest grossing film of all-time. Also we can look forward to the sequel in about 18 months, as Disney intends to get everything it can out of this cash cow franchise.

Disney suffered a few downgrades last quarter, as losses primarily related to ESPN put pressure on expectations. ESPN though is still the dominant force in live sports programming in the United States, and it looks set to hold onto its dominance for a long time. There are concerns about ESPN and the cost of sports packages driving more cord cutting.

The Mouse House remains a top consumer media company with multiple streams of income. Disney has the movie studio business poised to improve, as with accelerating theme park business, and network programming continues to drive viewership with extensive sports programming. Most importantly, the company produces tons of content that will keep it a long-term media alternative.

Anyone has to admit that most trends and successes cannot last forever, and that might be a concern with Disney investors that it has run its course, although this is highly unlikely.

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