The Disney stock price crashed by more than 2% after AT&T (T) and Discovery (DISCA) announced the biggest media merger in history. The DIS stock is trading at $170, which is more than 15% below its all-time high. This drop values the company at more than $308 billion. The Netflix stock price also declined by more than 1%.
Warner Media Discover Merger
The Disney share price declined after AT&T announced that it would merge its media business with Discovery. The deal will lead to the creation of a new media company with a market value of more than $150 billion. It is a notable deal since it will combine the biggest scripted and unscripted media companies. It is simply a bet that a bigger company that combines these two unique structures will help to compete against Netflix and Disney.
However, the sell-off of Disney stock seems irrational. For one, the merged company will likely continue operating as two different companies. I imagine that some Discovery shows will move to HBO Max while some HBO shows will move to Discovery+. Therefore, I don’t think that Disney or Netflix will lose customers to the new entity.
The deal came a few days after Disney reported relatively weak earnings. The company made 79 cents per share, better than the median estimates by analysts. However, its revenue of more than $15.6 billion missed the overall estimate of more than $15.87 billion. Most importantly, the firm reported more than 103.6 million Disney+ subscribers, lower than the expected 109 million.
Still, the firm is still on track to reach more than 230 million customers in the next few years. Still, this is a remarkable journey for a service that was not there two years ago.
In the longer-term, I believe that the Disney stock price will recover. Furthermore, the company is on track to open its theme park business according to CDC guidelines. Its television business could see some strong results as businesses boost their advertising.
According to Marketbeat, analysts believe that the Disney stock price will rise by 13% to $192. Those at Truist expect it to rise to $200 whole those at Royal Bank of Canada (RBC) and Goldman Sachs see it rising to $215.
Disney stock price forecast
Turning to the daily chart, the DIS stock price had dropped sharply in the past few sessions. Along the way, it has dropped below the 23.6% Fibonacci retracement level at $173. It has also crossed the 50-day moving average and is slightly above the 200-day EMA. It has also dropped below the descending channel shown in black.
Therefore, n the near term, the stock could see further declines as bears target the 38.2% retracement level at $155. However, for long-term investors, Disney is a good stock to invest in.