A Different Kind of Disney Sequel

This has been a rocky year of transition for Walt Disney. 

The lucrative theme park business is still making a comeback from the effects of the pandemic, and the company's pivot to direct-to-consumer streaming remains a work in progress. This year has also been the farewell tour of chairman and former CEO Bob Iger, who retires on Friday. 

In November, both of those businesses showed big misses, and the stock tumbled. The shares are down nearly 9% since the beginning of November and Disney is heading to be the year's biggest loser in the Dow Jones Industrial Average, with a decline of 14.5%.   

That may actually be a good omen, as Connor Smith explained on Barrons.com: 

The mean next-year change for the Dow’s biggest loser over the past 25 years is a gain of 12%, compared with a gain of 6.7% for the Dow’s biggest winner in the following year, according to Bespoke Investment Group. The biggest loser has seen positive returns 58% of the time in the 25-year period.

That trend, alas, has started to reverse in recent years: 

Starting with 2016, the best performer in the Dow has a following-year average gain of 42%. The biggest loser has only risen three times in the following year over the last eight years.

Still, Barron's has long been bullish on Disney, which gained 25.3% in 2020, and it's not because of any statistical quirk. A big part of the argument for the company is the transition to streaming.

When it comes to streaming, content is king. That bodes well for Disney. CEO Bob Chapek told investors in November that "the dam will break in terms of the content that we announced last December that will be substantial." Among the new content is The Book of Boba Fett, a live-action Star Wars series on Disney+, which made its debut today. "Investors hope such original content hitting Disney’s streaming services in the coming years can help spur growth," Connor wrote. 

Wall Street is also bullish on the company: 21 of the 30 analysts listed by FactSet have a Buy or the equivalent rating on Disney stock. The mean price target is $193, 25% above today's close.