Discovery (DISCA) provides original content, purchased content, and live events to nearly four billion subscribers and viewers worldwide. DISCA content is distributed to entertainment-seekers in the United States and those in more than 22+ other countries. All in all, DISCA content is provided in 50 languages.

Minus the recent pullback, the stock has been on a roll, rising 135% year-to-date. The society-wide focus on entertainment during the pandemic has clearly helped DISCA. DISCA TV brands range from Discovery to the Discovery Channel, Food Network, HGTV, Animal Planet, TLC, OWN, MotorTrend, Science Channel, and more.

Is DISCA properly positioned to continue its bull run in 2021? Or will the stock plateau or possibly even decline in the months ahead? Let’s find out.

DISCA’s Merits

DISCA has a reasonable forward P/E ratio of 25.17. This P/E ratio is not outrageously high, especially because the stock is currently trading about $8 below its 52-week high of $78.14. Through Discovery’s streaming service, Discovery+ is a relatively recent entrant into the streaming wars; its early growth is second only to that of the uber-popular Disney+. 

At the moment, Discovery+ serves 12 million viewers. Though these figures don’t match Disney+, they are quite respectable, considering DISCA’s streaming service has only been around for a couple of months. Just about everyone agrees DISCA’s streaming service has its merits, providing a wide range of content with true mass appeal.

Subscribers to the streaming service pay $4.99 per month for content with ads and $6.99 for content that does not have ads. The beauty of this streaming business is it partially recycles previously created content that aired on TV. However, the streaming option empowers viewers to choose the content they want to view in an on-demand manner. 

It is particularly interesting to note DISCA makes more revenue per subscriber through its streaming service than by providing programming to cable companies. In other words, there is the potential for DISCA to change its business model, pivoting to streaming and leaving cable in the dust.

With trailing 12-month revenue of more than $10 billion, the annual revenue of $300 million from Discovery+ is not exactly fundamental to its success. Yet, it is certainly an important source of revenue growth that has the potential to become a primary revenue driver in the years ahead. 

DISCA’s streaming service has generated interest from plenty of advertisers, with more than 100 officially placing ads. DISCA anticipates an additional 200 advertisers will sign up to promote their offerings on the streaming service in the second quarter of 2021.

DISCA According to the Analysts

Analysts are not as bullish on DISCA as some investors might expect. The average analyst price target for DISCA is a measly $44.40. This could mean a potential downside of 25% if analyst forecasts come to fruition. However, there is a high target price of $65 for the stock. The lowest analyst price target for DISCA is $21. 

A total of 25 analysts have issued recommendations for DISCA. Only one of these analysts considers DISCA a Strong Buy. A total of five analysts consider DISCA a Buy, while 16 consider it a Hold, one considers it a Sell, and one considers it a Strong Sell.

DISCA POWR Ratings

DISCA has C grades in the Quality, Momentum, Value, and Growth components of the POWR Ratings. If you are curious about how DISCA performs in the Sentiment and Stability components, you can find out by clicking here. Of the 18 publicly traded companies in the Entertainment – Media Producers industry, DISCA is ranked 10th. Click here to find other top stocks in this industry.

Is Discovery Stock Still a Buy?

Even if DISCA eventually parts ways with cable companies, this entertainment powerhouse can clearly stand on its own two feet. The company’s streaming platform is generating comparably high ad prices. Add I like that DISCA is developing ad tech to boost ad targeting and launch new formats for digital platforms.

However, DISCA’s massive 135% gain in such a short period of time makes it difficult to recommend buying this stock right now. Plus, its grade of C in our POWR Ratings is not reassuring. So, investors should wait for pullbacks and a higher POWR Rating before investing.

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DISCA shares were trading at $71.91 per share on Tuesday afternoon, down $2.74 (-3.67%). Year-to-date, DISCA has gained 138.98%, versus a 4.35% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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