Disney Stock Forecast: Is It A Buy?

When Walt Disney first drew his signature character 90 years ago, he could not have imagined the span of the Disney empire today.

Mickey Mouse is one of the most recognized faces in the world, and his iconic ears have been incorporated into products ranging from designer fashion to household décor.

Disney films are some of the most popular in history, and the organization is frequently included on lists of most powerful brands and most reputable companies.

Investors rely on Disney shares to add stability to their portfolios. Though Disney has the same ups and downs of any large organization, over time, it has produced steady value.

However, new technologies and disruptive digital entertainment is changing the industry at a rapid rate – and Disney stock has slumped in recent years.

Some investors and analysts wonder whether Disney [NYSE: DIS] will continue to be a reliable success in an increasingly digital world.

How Disney Makes Money

Disney movies and related merchandising are infused into American culture, and Disney characters can be found on everything from cereal boxes to Pez dispensers.

Based on the visibility of its blockbuster movies, it’s easy to assume that this is where the lion’s share of company revenue is produced.

However, the truth is that Disney’s television programming has been the true driver of strong revenues for decades. Parks and resorts are in second place, and studio entertainment is a distant third.

Disney-owned channels extend far beyond the kid-focused Disney Channel.

The company has a strong presence in broadcast through its ownership of ABC, and the biggest money-maker it owns on cable is ESPN.

However, consumer needs are evolving. Where packaged cable services were once the only option, advances in technology have opened up a variety of choices for those who can live without ESPN.

The introduction of streaming services and other cable-tv alternatives presents a significant challenge to Disney’s long-term success.

Is Disney Stock Undervalued?

Before calculating whether Disney stock is undervalued, it’s important to look at what the company is doing to meet the challenges presented by streaming services.

First, it has taken a fresh look at opportunities available in the non-network-media areas of the company. For example, it has capitalized on the growth potential of its theme parks.

Disney [NYSE: DIS] is exploring international expansion, and it has restructured pricing in US parks to increase revenues and maximize profits.

Second, Disney [NYSE: DIS] continues to focus on creating high-quality studio entertainment, which translates into future gains.

On movie ticketing giant Fandango’s list of top 10 most-anticipated movies for 2019, upcoming Disney films fill seven spots.

Popular movies draw visitors to theme parks, create markets for new lines of themed merchandise, and offer opportunities for continued revenue through television and streaming services. For example, the opening of Star Wars: Galaxy’s Edge – Star Wars-themed areas of the US Disney parks – is sure to bring in crowds and profits.

Finally, Disney [NYSE: DIS] is focusing its efforts on direct competition with Netflix [NASDAQ: NFLX]Amazon Prime, and other streaming services.

The company owns 30% of Hulu, and when its acquisition of the Fox network is complete, it will acquire Fox’s 30 percent of Hulu as well.

In addition, Disney plans to launch its own streaming service to feature Disney films, rather than licensing this content to Netflix.

Since this includes favorites like the Star Wars series and a variety of Marvel features, as well as animated hits, there is potential to attract audiences of all ages. If the service is as successful as predicted, Disney is likely to come roaring out of its recent share price slump.

Ultimately, the current pricing is not necessarily a bargain, but recent losses have made it slightly more affordable for those looking to buy.

If Disney’s forward-thinking strategy is successful, there is potential for substantial profit in coming years.

What are the Risks Buying Disney Stock?

The biggest risk that Disney and Disney investors face is the possibility of a misstep with the new streaming service.

This channel is critical to maintaining a leadership position in the entertainment industry, and a failed launch could be catastrophic.

While Disney [NYSE: DIS] has the benefit of built-in content that is sure to be in high-demand, it has not yet demonstrated that it can compete with Netflix in terms of access across devices, original niche content that caters to limited audiences, and exclusive programming to expand the list of available titles.

Nonetheless, though there is risk with any stock purchase, this one hasn’t discouraged many would-be investors.

Disney has the talent and resources needed to create a state-of-the-art platform, and there is no reason to believe that the streaming service will flop.

Disney Stock Forecast: Buy or Sell?

The bottom line is that Disney [NYSE: DIS] is well-positioned to take on the challenges it faces as consumers’ buying habits change.

Though it has been slow to respond to the loss of cable revenues, the company is poised to battle competition head-on in 2019.

Based on its long history of success and the strength of its reputation, there is every reason to believe that Disney will come out on top.

Some of the most optimistic analysts estimate a 32.5 percent increase in share price over the next twelve months, and the median prediction is a gain of 16.2 percent. Overall, a majority of analysts agree that Disney is a buy.