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Dow Jones Slips as Disney Stock Upgraded, Apple Stock Follows Dow Lower

By Timothy Green - Dec 9, 2020 at 2:01PM

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Analysts are optimistic about Disney's streaming business, but the potential for a strong iPhone upgrade cycle wasn't enough to prevent Apple stock from heading lower.

The Dow Jones Industrial Average ( ^DJI 0.00% ) slipped on Wednesday, down about 0.35% at 12:50 p.m. EST. While positive vaccine news and the potential for a new stimulus bill have helped boost the stock market in recent weeks, they weren't enough on Wednesday to keep the Dow moving higher.

Disney ( DIS -1.90% ) stock was one of the Dow's strongest performers after multiple analysts talked positively about the company ahead of its annual Investor Day event. Apple ( AAPL -0.32% ) also received some positive analyst commentary, but the stock was underperforming the Dow by early afternoon.

The Disney Plus logo.

Image source: Disney.

Disney gets some analyst love

Disney's annual Investor Day event, which will be focused on the streaming business, is scheduled for Thursday. Ahead of that event, multiple analysts chimed in on Wednesday with positive things to say about the stock.

Analysts at Wells Fargo upgraded Disney stock to overweight, based on the company's progress transforming into a streaming-focused company. Wells Fargo pointed to the strength of Disney's streaming brands, which include Disney+, Hulu, and ESPN+, and it sees the company further leveraging its existing content library and assets in the coming years.

KeyBanc's analysts are also optimistic on Disney's streaming strategy, starting coverage of the stock at "overweight" with a $177 price target. KeyBanc admits that the core media networks are under pressure but expects continued heavy investments in streaming to drive growth.

Morgan Stanley also weighed in, maintaining its overweight rating and raising its price target from $150 to $175. In addition, Loop Capital lifted its price target from $150 to $175 while boosting its earnings per share (EPS) estimates for 2022. Loop Capital believes that Disney might announce a new tier for Disney+ that could increase the average revenue per user.

Disney has quickly become one of the leaders in the streaming business, at least in terms of number of subscribers. Disney+ had over 73 million subscribers in November, an incredible number for a service that was launched less than a year ago. The pandemic is certainly helping, but Disney's vast trove of content and inexpensive pricing are doing a lot of the work.

Outside of the streaming business, Disney's facing immense challenges. The movie theater industry may never be the same after the pandemic, and it's unclear whether streaming can support the massive budgets of the company's biggest movies. The theme-park business is also struggling, with Disneyland in California still closed. It may be quite a while before Disney's parks are back to pre-pandemic levels of attendance.

Shares of Disney were up about 1.4% by early Wednesday afternoon on the positive analyst commentary. The stock is now up nearly 8% since the start of the year.

Apple price target raised on iPhone hopes

Apple stock was also talked up by an analyst on Wednesday, but it wasn't enough to keep the stock from slipping. Analyst Daniel Ives of Wedbush boosted his price target on Apple stock from $150 to $160, while setting a bull-case price target of $200. The iPhone 12 launch was the catalyst for the price-target bump.

Ives believes that pre-orders for the iPhone 12 family have more than doubled compared to the iPhone 11 family, based on lead times on Apple's website and channel checks. He also believes Apple could sell 240 million iPhones in fiscal 2021 under his bull-case scenario, well above the average analyst estimate of 215 million.

Those sales will be driven by upgrades. Ives estimates that around 350 million out of 950 million iPhones in use globally are old enough for an upgrade to be realistic. This could lead the iPhone 12 to drive "an unprecedented upgrade cycle" for the tech giant.

Apple stock was down around 0.7% despite the higher price target. This holiday season will be like none other, and the possible scenarios for Apple range from weak iPhone demand due to economic uncertainty, job losses, and a weak economy to robust demand driven by heavy spending by those unaffected by the pandemic financially. Only time will tell which scenario plays out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$164.77 (-0.32%) $0.53
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,483.72 (0.00%) $0.00
The Walt Disney Company Stock Quote
The Walt Disney Company
$142.15 (-1.90%) $-2.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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