Shares of Disney (DIS 0.68%) were mercilessly punished immediately following the outbreak of COVID-19, losing more than 40% of their value. The stock has climbed out of that hole and is now up about 7% for the year. While the shares are near all-time highs, they will surge to new heights next year.
That's according to Wells Fargo analyst Steven Cahall. On Wednesday, Cahall upgraded Disney stock to overweight (buy) from equal weight (hold) and raised his price target from $155 to $182. His new target represents potential gains for investors of roughly 18% over the stock's closing price on Tuesday of roughly $154.
Disney's California Adventure. Image source: Author.
Cahall called out Disney's "transformation into a global streaming content company" as the primary catalyst for growth, citing the "deep Disney brands" including Disney+, Hulu, Star, ESPN, and Disney 18+ (the adult-focused offering rumored to be in the works).
"The gloves are off, the organizational barriers are torn down and there are no sacred cows. Streaming is the nucleus of Disney now, big investments in content will feed a variety of services and scale will beget scale," Cahall wrote in a note to clients. He went on say that he expects Disney's subscriber base to grow conservatively to 250 million to 300 million over the coming five years. For context, tech giant Netflix closed out the quarter with 195 million subscribers.
Will Disney's stock hit $182?
The evidence suggests that Cahall is making the right call. The company originally forecast Disney+ subscribers to reach 60 million to 90 million by 2024. The tailwinds provided by various stay-at-home orders around the globe accelerated adoption, and Disney+ closed out the fiscal year with 73.7 million subscribers, well ahead of schedule.
Given the impressive growth of its streaming business and a coronavirus vaccine on the verge of distribution, Disney could soon regain its title as "the Happiest Place on Earth."
