The Walt Disney Company (DIS) shares briefly dipped 1% from their record highs during pre-market trading after BMO Capital Markets downgraded the stock to Market Perform but raised its price target from $165.00 to $185.00.

Key Takeaways

  • Disney shares briefly dipped during pre-market hours after BMO Capital Markets downgraded the stock to Market Perform but raised its price target to $185.00.
  • The stock moved sharply higher last week following its Investor Day event that included ambitious growth forecasts.
  • The stock could see some near-term consolidation given the lofty relative strength index (RSI) reading, but the intermediate-term trend remains bullish.

BMO Capital Markets analyst Daniel Salmon cited Disney stock's considerable multiple expansion as a catalyst for the downgrade. However, he added that improved vaccination rates could help Disney continue to be a solid reopening play and that Disney+ subscription forecasts surpassed even the most bullish expectations, leading to the higher price target.

Disney shares soared last week following its Investor Day event that included an aggressive plan for its streaming services. The company tripled its Disney+ forecast to 230 million to 260 million subscribers and raised its outlook at Hulu and ESPN+ to bring the total global subscribers to 300 million to 350 million by fiscal 2024 – more than Netflix, Inc.'s (NFLX) current levels.

Chart showing the share price performance of The Walt Disney Company (DIS)
TradingView.com

From a technical standpoint, the inside day following a bullish move during Friday's session suggests that the stock is largely holding on to its gains. The RSI remains overbought with a reading of 82.29, but the moving average convergence divergence (MACD) continues to signal an intermediate-term bullish trend. These indicators suggest that the stock could see some consolidation before moving higher.

Inside days refer to a candlestick pattern that forms after a security has experienced daily price ranges within the previous day's high-low range. That is, the price of the security has traded "inside" the upper and lower bounds of the previous trading session. It may also be known as "inside bars." Inside days may indicate consolidation or lower price volatility.

Traders should watch for consolidation above trendline support at $160.00 before the stock resumes its move higher. If the stock breaks down from those levels, traders could see a move toward the 50-day moving average at $136.91 or the 200-day moving average at $120.84, although that scenario appears less likely to occur given the bullish fundamental sentiment.

The Bottom Line

Disney shares fell during pre-market hours after BMO Capital Market downgraded the stock to Market Perform amid valuation concerns. Despite these concerns, the analyst raised his price target to $185.00, citing a potentially bullish reopening play and Disney+ subscriptions that surpassed even the most bullish expectations.

The author holds no position in the stock(s) mentioned except through passively managed index funds.