Analyst: buy Disney stock on recent sell-off for a 33% return

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Walt Disney Co (NYSE: DIS) lost nearly 15% on Wednesday after reporting a terrible fourth-quarter and disappointing on guidance for fiscal 2023. But the sell-off, as per a Bank of America analyst, has created an exciting buying opportunity.

Ehrlich’s bull case for the Disney stock

Jessica Ehrlich sees not one but several positive catalysts that could push the Disney stock to $115 – more than 30% up from here.

In the near-term, she expects strength of the content slate to help boost the stock price. On CNBC’s “Closing Bell”, Ehrlich said:

Wakanda opens this weekend and it was tracking very well. Then, before Christmas, we have Avatar 2. The first Avatar was the biggest movie of all time.

She also recommends buying Disney stock on the cheaper, ad-supported tier that Disney+ is set to launch on December 8th. A 38% price hike that also goes live next month will help boost revenue as well, Ehrlich added.

DTC to turn profitable in fiscal 2024

Subscriber growth is already strong at the flagship streaming service and Ehrlich does believe the management when it says the direct-to-consumer business will turn a profit in fiscal 2024.  

We’ll start to see DTC losses coming down sequentially in December quarter. There should be a big swing in losses, from $4.0 billion in fiscal 2022, our projection is $2.5 billion in fiscal 2023. So, it starts to move towards profitability in 24.

Disney is also expected to get a boost once China, that’s still wrestling with COVID lockdowns, comes back online.

Versus the start of 2022, Disney stock is now down about 45%.

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