5 Best Consumer Discretionary Stocks to Buy

2. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holders: 109

The Walt Disney Company (NYSE:DIS) is a leading entertainment conglomerate whose shares are down 36% year to date. On October 26, Brandon Nispel of KeyBanc trimmed his price target to $143 from $154 on The Walt Disney Company (NYSE:DIS) but kept an ‘Overweight’ rating given negative macro trends could be a headwind for the entertainment company’s Media business.

Third Point commented on The Walt Disney Company (NYSE:DIS) in a Q3 2022 investor letter,

“As disclosed in our Q2 letter, we reinitiated a significant position in The Walt Disney Company (NYSE:DIS) when the company retested its Covid lows earlier this year. At the current price, Disney is trading for little more than the stand-alone value of its Parks business and a mere 15x ’24 “street” consensus. The company remains early in its Direct to Consumer (“DTC”) transition with a leading market position, and yet the current stock price ascribes negligible value to the streaming business. We believe this is due to questions around the terminal economics of streaming, given large losses being generated today at Disney (>$1 billion dollars last quarter) and stagnating margins at peers such as Netflix. On the last earnings call, management highlighted three items that could lead to an inflection in DTC profitability over the next 12 months: a 38% price increase for Disney+ in the US; moderating growth in cash content expense; and an advertising tier for Disney+ launching in two months that can drive additional ARPU given high demand for the Disney brand amongst advertisers.”