After being closed at various times during the past 19 months, all of Walt Disney‘s (DIS) theme parks are now open. Some Disney cruises have resumed. And Disney+ continues to offer hit shows and new movies.
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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 since early 2020, 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
While its theme parks and cruise businesses got hit, the entertainment giant has found great success with its Disney+ streaming service. And reopening movie theaters boost prospects for box-office sales.
After a 15-month delay, “Black Widow” debuted July 9 via Disney+ Premier Access and in theaters. It took in $80 million in domestic box office receipts in its opening weekend, making it the biggest premiere since the pandemic began. The “Jungle Cruise” had a similar hybrid release on July 30.
“Shang-Chi and the Legend of the Ten Rings” kicked off exclusively in theaters on Sept. 3 and racked up a record-breaking $94 million during the Labor Day weekend. Marvel’s newest superhero movie dominated the domestic box office for four straight weekends. Globally, “Shang-Chi” has racked up more than $420 million in sales so far, according to Box Office Mojo.
On Oct. 18, Disney delayed upcoming Marvel movie releases including “Doctor Strange in the Multiverse of Madness,” “Thor: Love and Thunder” and “Black Panther: Wakanda Forever” due to production issues.
Also the same day, Barclays downgraded its rating to equal weight from overweight amid concerns about slowing growth of its Disney+ streaming service. It also lowered its price target to 175 from 210.
Disney+ has produced several Marvel-based hit TV and streaming shows, including “WandaVision” and “The Falcon and the Winter Soldier.” “Loki” kicked off June 9 and became the most watched Disney+ Marvel show to date, 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.
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 Aug. 12, Disney reported fiscal Q3 results that topped views on both the top and bottom lines. It earned 80 cents a share on revenue of $17.02 billion vs. FactSet forecasts for 55 cents on $16.76 billion.
Disney+ subscriptions of 116 million beat FactSet views for 115.2 million. ESPN+ had 14.9 million, and Hulu had 42.8 million. Total streaming subscriptions hit 174 million, above estimates for 170.3 million.
Chapek said Disney+ is available in parts of Japan with expansion to the rest of the country in late October. South Korea, Taiwan, and Hong Kong will follow in mid-November. Star+ will launch throughout Latin America later this month.
Media and entertainment revenue climbed 18% to $12.7 billion, including a 57% jump in direct-to-consumer revenue to $4.3 billion and a 16% bump in linear networks to $7 billion.
Theme parks and products revenue nearly quadrupled to $4.3 billion as resorts opened back up. Disney estimates the segment will see operating income improve by $2.2 billion in the current quarter vs. a year ago, after declining by $1.6 billion from fiscal Q1 to Q3 vs. pre-Covid results.
On Sept. 21, Disney stock stumbled 4% in heavy volume after Chapek said at a Goldman Sachs conference that the delta variant Covid-19 resurgence is creating production delays. That’s reflected in his lower-than-expected forecast for Disney+ subscribers in the current quarter, Barron’s reported. Analysts were looking for 17 million, according to FactSet.
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 52 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 14th in the 21-stock Media-Diversified group, based on that rating.
A 57 Earnings Per Share Rating reflects a five-year earnings growth rate of -25%, 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 22% in the current fiscal year ending in September, followed by a 101% jump in fiscal 2022, according to FactSet.
Disney is expected to earn 51 cents a share when it reports fiscal Q4 results Nov. 10 after the close, according to Zacks. In the same year-ago quarter, the media giant lost 20 cents a share.
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.
Since then, Disney cleared several buy points en route to a March 8 record high. It’s been consolidating since but has been stuck below the 10-week moving average. The stock is now about 16% away from the 203.12 buy point, according to IBD MarketSmith chart analysis.
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.
Also note that Disney’s 57 EPS Rating and 52 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. The market is back in a confirmed uptrend, which means it’s OK for investors to buy leading stocks breaking out from proper bases. 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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