After being closed at various times during the past 16 months, all of Walt Disney‘s (DIS) theme parks are now open. Disney cruises are set to resume soon. And Disney+ continues to offer hit shows.
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Disney stock had also rebounded to new highs after coming back more than 140% from its March 2020 coronavirus crash lows, though it has since pulled back.
It’s been a wild ride on Wall Street the past year, as the stock market fell into a bear amid the coronavirus crash. Disney stock got slammed as the Dow Jones index company closed its theme parks and suspended Disney Cruise Line departures.
Shift For Dow Jones Disney Stock
And its quarterly results showed some of those ill effects. But now it’s looking forward as Covid-19 cases slow down and countries rush to administer vaccines. In fact, travel-related stocks have rallied recently, amid hopes restrictions will continue to ease.
While its theme parks and cruise businesses have taken a hit, the entertainment giant has found great success with its Disney+ streaming service. And movie theaters are reopening, which boosts prospects for box-office sales.
“Black Widow” will be released Friday via Disney+ Premier Access and theaters. The “Jungle Cruise” will have a similar hybrid release on July 30, while “Shang-Chi and the Legend of the Ten Rings” will have a 45-day exclusive theatrical release starting Sept. 3.
Disney+ has produced several Marvel-based hit shows, including “WandaVision” and “The Falcon and the Winter Soldier.” “Loki,” its newest series, kicked off June 9 and became the most watched Disney+ Marvel show with 890,000 U.S. households tuning in for the debut.
Does that mean Disney stock is a buy right now? Read on to find out.
Good News For Disney+ Fans
At its Dec. 10 investor day, the company said Disney+ subscribers were at 86.8 million as of Dec. 2. That’s up from 73.7 million in early October and 60.5 million in early August. Including Disney+, Hotstar, Hulu and ESPN+, the company’s streaming services have more than 137 million subscribers.
This year, Disney+ will expand to Eastern Europe, South Korea, Hong Kong and other markets.
The company now expects to have 230 million-260 million Disney+ subscribers by 2024, up from its prior estimate of 60 million-90 million for the same time frame, with global subscriptions across all services reaching 300 million-350 million. Netflix (NFLX), by comparison, has 195.15 million subscribers.
Additionally, the house of mouse plans to roll out a new Star-branded streaming service internationally this year, tapping content from ABC Studios, Fox Television, FX, Freeform, 20th Century Studios, Searchlight and other Disney-owned assets.
New CEO Takes The Helm
Bob Chapek, chairman of Disney Parks, Experiences and Products, was named new chief executive after Bob Iger stepped down in February 2020. At the time, Iger said he would stay on until the end of 2021 as executive chairman and direct the company’s creative endeavors.
Under Iger’s 14-year-plus tenure, Disney stock soared more than 400%, or about 12% annualized. He revamped the theme parks, brought Star Wars, Marvel and Pixar into the company’s movie universe, and launched Disney+.
Disney+ Continues To Grow
After the close May 13, Disney reported mixed fiscal Q2 results, with earnings per share of 79 cents on revenue of $15.61 billion. Analysts polled by Zacks Investment Research expected 31 cents on $16.02 billion in sales.
Its streaming business continued to grow with 103.6 million Disney+ subscribers at the end of Q2, from roughly 100 million in early March and 94.9 million as of Jan. 2. But that missed some Wall Street forecasts for 109 million.
“We have not seen a significant churn rate,” Chapek said on the earnings call. “We seem to be resilient to price increase and (that) makes us feel bullish going forward.”
Media and entertainment distribution revenue rose 1% to $12.4 billion, with direct-to-consumer revenue up 59% to $4 billion, as streaming subscriptions and fees rose. Disney will also launch Star+, including sports, in Latin America on Aug. 31.
Parks, experiences and products revenue fell 44% to $3.17 billion. Disney estimated that the parks segment saw an additional impact of $1.2 billion on operating income vs. a year ago.
ARK Boosts Disney Stake
On July 6, Cathie Wood’s ARK Next Generation Internet ETF (ARKW) added 108,653 Disney shares to its holdings. That brings its Disney stake to 260,134 shares worth $45.18 million. ARKW first opened its position on May 14, when it bought 150,556 shares worth $26.15 million.
Humble Beginnings
It’s hard to believe the $261 billion market cap behemoth started out in 1923 as Disney Brothers Cartoon Studio, by Walt and his brother, Roy O. Disney. Highlights along the way included Disney’s first sound film, “Steamboat Willie,” in 1928, its first feature-length animated film, “Snow white and the Seven Dwarfs” in 1937, and a foray into television in 1950.
In 1955, Walt’s theme park came into fruition as Disneyland in Anaheim. A second location in Orlando, Fla., was announced in 1965. The following year, Walt passed away, leaving Roy in charge. Walt Disney World opened in 1971, two months before Roy’s death. But the company kept growing.
During the fiscal year ended in September, the theme park and media giant generated nearly $70 billion in sales.
Disney Stock Fundamentals — And Earnings
IBD Stock Checkup assigns Disney a 30 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 20th in the 26-stock Media-Diversified group, based on that rating.
A 34 Earnings Per Share Rating reflects a five-year earnings growth rate of -22%, which includes a flat result in fiscal 2017, a 19% decline in fiscal ’19 and a 65% drop for fiscal ’20. Analysts now expect EPS to rise 16% in the current fiscal year ending in September, followed by a 116% jump in fiscal 2022, according to FactSet.
Is Disney Stock A Buy?
After breaking out from a flat base and rising to record highs in November 2019, Disney stock tumbled more than 40% during the coronavirus market crash. It found a bottom on March 18, 2020, before making its way back to fresh highs.
On Feb. 8, Disney led the Dow Jones Industrial Average with a 4.9% jump to a new high. Shares cleared a 183.50 buy point of a five-week flat base in volume 38% higher than usual, according to MarketSmith chart analysis.
Disney stock advanced nearly 11% from the entry. But it has since pulled back to below the buy point. The stock had been building a flat base with a 203.12 entry, but undercut the bottom of the base. Shares have been trading below the 10-week moving average for much of the past three months and are 15% off their 52-week high.
It is not a buy right now.
The relative strength line, which compares a stock’s performance to the S&P 500, continues to lag. A move to new highs at or ahead of a potential breakout would offer a bullish sign.
Note that Disney’s 34 EPS Rating and 30 Composite Rating are well below the desired 80 minimum of most leading growth stocks.
Don’t forget to keep an eye on the market’s action, too. Read The Big Picture for detailed daily analysis of what’s going on in the stock market.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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