These 3 Mega-Cap Stocks Will Rally 25% or More, According to Wall Street

NYSE: DIS | Walt Disney Co. News, Ratings, and Charts

DIS – The equity benchmarks rose sharply in the last trading session because the Fed provided an interest-rate-increase timeline, removing some uncertainty in the equity markets. Nevertheless, rising inflation and a new coronavirus variant continue to hang like a pall over the markets. But Wall Street analysts still expect a more than 25% upside in the large-cap stocks of Walt Disney (DIS), PayPal (PYPL), and Comcast (CMCSA). Read on to learn why.

On Wednesday, stock prices rose as some uncertainties related to Fed’s monetary policies were put to rest. The S&P 500 rose 1.63%, while the Dow Jones Industrial Average added 383.25 points, or 1.08%, as the Fed signaled it would accelerate the unwinding of its monthly bond buying and forecasted its rate hikes next year.

However, the CBOE Volatility Index (^VIX) has risen 17% over the past month because the stock market is unnerved by rising inflation and the COVID-19 omicron variant. But because the  Fed has moved to accelerate its reduction of asset purchases, but not so regarding interest rate hikes, fundamentally solid large-cap stocks can be valuable additions to one’s watchlist to ensure a stable return.

Wall Street expects the large-cap stocks of The Walt Disney Company (DIS), PayPal Holdings, Inc. (PYPL), and Comcast Corporation (CMCSA) to rally more than 25% in price in the near term.

The Walt Disney Company (DIS)

Through the two broad segments of Disney Media and Entertainment Distribution; and Disney Parks, Experience, and Products, DIS provides film and episodic television content and streaming services and operates theme parks and resorts. The Burbank, Calif.-based company has a market capitalization of $273.38 billion.

On November 8, DIS, IMAX Corporation (IMAX), and Xperi Holding Corporation (XPER) subsidiary DTS announced a collaboration to stream popular Marvel titles in IMAX’s Expanded Aspect Ratio at home. The collaboration should profit DIS by attracting Marvel fans and audiences on the Disney+ platform.

In October, ViacomCBS Inc. (VIAC)declared that ViacomCBS Networks International (VCNI) had agreed to acquire a majority stake in Fox TeleColombia & Estudios TeleMexico, a Spanish language content producer, from DIS and the platform’s founding family. The transaction might create value for the company.

For its fiscal fourth quarter, ended October 2, DIS’ revenues increased 26% year-over-year to $18.53 billion. Its net income from continuing operations came in at $160 million, while its EPS excluding certain items stood at $0.37, both up substantially from their negative year-ago values. Its free cash flow improved 62.3% from the prior-year quarter to $1.52 billion.

A $3.87 consensus EPS estimate for the current year (fiscal 2022) indicates a 90.6% year-over-year increase. And the $74.54 billion consensus revenue estimate for the current  year of  reflects a  24.5% rise from the prior year.

The stock has gained marginally to close yesterday’s trading session at $150.40.

Of the 24 Wall Street analysts rating DIS, 18 have rated it Buy, while six have rated it Hold. The 12-month median price target of $199.23 indicates a 32.5% potential upside. The price targets range from a low of $168.00 to a high of $225.00.

PayPal Holdings, Inc. (PYPL)

PYPL in San Jose, Calif., is a popular technology platform and digital payments company that allows consumers and merchants worldwide to make digital and mobile payments. It offers various payment solutions such as PayPal, PayPal Credit, Venmo, Hyperwallet, and Braintree. The company has a market capitalization of $224.01 billion.

On December 1, PYPL announced that it had made its PayPal in 4 and PayPal Credit available for Ltd. (WIX) platform’s merchants through a dedicated Pay Later checkout button. The venture might add to PYPL’s revenue stream.

In October, PYPL’s shopping rewards platform, Honey, introduced cash back through PayPal, allowing users in the United States to redeem reward points while shopping online. Regarding this feature, Frank Keller, SVP Enterprise Solutions and Digital Commerce at PYPL, said, “Cash back is popular way consumers look for rewards, and we’re excited to extend this to new and existing Honey users in the U.S. to help them get more value out of their online shopping experience.”

PYPL’s net revenues increased 13.2% year-over-year to $6.18 billion in its fiscal third quarter, ended September 30. Its non-GAAP net income and non-GAAP EPS rose 3.5% and 3.7%, respectively,  from the same period last year to $1.32 billion and $1.11. And its free cash flow improved 19.9% from the prior-year quarter to $1.29 billion.

The Street’s $1.13 EPS estimate for the current  quarter (ending December 2021) reflects a 4.6% year-over-year improvement. And its $6.88 billion  revenue estimate for the current quarter indicates a 12.5% increase from the same period last year. Furthermore, PYPL has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.

PYPL’s shares have gained 2.1% intra-day to close yesterday’s trading session at $190.66.

25 of the 31 Wall Street analysts rating PYPL have rated it Buy, while five rated it Hold, and one has rated it Sell. The 12-month median price target of $272.62 indicates a 43% potential upside. The price targets range from a low of $190.00 to a high of $342.00.

Comcast Corporation (CMCSA)

CMCSA is a media and technology company operating globally. The Philadelphia, Pa.-based concern functions through the segments of Cable Communications; Cable Networks, Broadcast Television; Filmed Entertainment; Theme Parks; and Sky. It has a market capitalization of $220.13 billion.

On December 15, MachineQ, a CMCSA company and IoT solutions hardware design firm, CoreKinect, announced a collaboration to supply a solution for near real-time visibility for managing inventory or assets in an automated fashion. Based on the growing demand for design and deployment of enterprise-grade IoT solutions, the new offering can benefit CMCSA.

On December 13, CMCSA announced the completion of a multi-million-dollar expansion to bring broadband services to homes and businesses in Las Vegas, N.M. The investment is expected to increase the company’s customer base in the area.

For its fiscal third quarter, ended September 30, CMCSA’s revenue increased 18.7% year-over-year to $30.30 billion. Its adjusted net income and adjusted EPS came in at $4.04 billion and $0.87, respectively, up 34.6% and 33.8% from the prior-year quarter. And its adjusted EBITDA rose 18.1% from the same period last year to $8.96 billion.

Analysts expect CMCSA’s EPS to increase 30.4% year-over-year to $0.73 in the current quarter (ending December 2021). The Street expects its revenue to improve 7.3% from the prior-year quarter to $29.73 billion in the current quarter. In addition, CMCSA has beaten consensus EPS estimates in each of the trailing four quarters.

The stock has declined marginally over the past five days to close yesterday’s trading session at $48.18.

Of the 15 Wall Street analysts rating the stock, 10 have rated it Buy, while four have rated it Hold, and one has rated it Sell. The 12-month median price target of $61.57 indicates a 27.8% potential upside. The price targets range from a low of $46.00 to a high of $75.00.

DIS shares were trading at $148.88 per share on Thursday afternoon, down $1.52 (-1.01%). Year-to-date, DIS has declined -17.83%, versus a 25.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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