Why Disney Stock Rallied To Multi-Week Highs Today

Disney Stock Gains Ground As Quarterly Results Beat Analyst Estimates

Disney stock opened with a gap up and tested multi-week highs after the company released its quarterly results. Disney reported revenue of $17.02 billion and GAAP earnings of $0.50 per share, easily beating analyst estimates on both earnings and revenue.

Several positive developments provided additional support to Disney stock. First, Disney’s parks were profitable for the first time during the coronavirus pandemic. The company’s business got a boost from reopening of parks and resorts, which immediately supported financial results.

Second, the number of Disney+ subscribers reached 116 million, exceeding analyst expectations. A year ago, Disney+ subscribers totaled 57.5 million, so the number of subscribers has doubled in just one year.

What’s Next For Disney Stock?

Analysts expect that Disney will report earnings of $2.35 per share this year and $5.00 per share in the next year, so the stock is trading at 37 forward P/E. Analyst estimates have moved a bit lower in recent weeks but the previous upside trend may be resumed after the release of the strong quarterly report.

It should be noted that current valuation levels look pricey even in the current market environment, but traders are ready to look beyond the next year and focus on Disney’s long-term earnings power.

The growth of Disney+ is strong, while the company’s parks’ segment will gradually improve its financial performance as restrictions are lifted around the world. It’s hard to expect big progress on this front in the upcoming months as the world is concerned about the spread of the Delta variant of coronavirus, but the outlook for the next year looks better.

It remains to be seen whether positive developments highlighted by the report will be sufficient enough to push Disney shares towards yearly highs near the $200 level that were reached back in March. However, the market loves growth, and is ready to tolerate rich multiples if a company has solid earnings potential in the future. In this light, Disney stock has decent chances to develop additional upside momentum in the upcoming weeks.

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