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Is Disney Stock A Buy Right Now, As It Trades Well Off Its Highs?

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.


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 sharply.

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 found great success with its Disney+ streaming service. And reopening movie theaters are boosting  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 nearly $432 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.

On Nov. 5, Disney’s “Eternals” opened at theaters. It’s raked in $161 million in ticket sales domestically and $395 million globally. But it hasn’t fared as well as the other recent Marvel movies.

“Encanto,” Disney’s latest animated offering, led the Thanksgiving box office with $40.3 million in sales. It held the top spot in its second weekend.

Is 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 Nov. 10 close, Disney reported worse-than-expected fiscal Q4 earnings, as Disney+ streaming subscriptions came up weak. It earned adjusted earnings of 37 cents a share on revenue of $18.53 billion vs. FactSet forecasts for 52 cents on $18.8 billion.

Disney+ added 2.1 million subscribers for a total of 118.1 million, well below views for about 126.2 million. The streaming service was a key revenue driver during the pandemic, as people were stuck at home due to Covid restrictions.

JPMorgan analyst Alexia Quadrani said in a recent note to clients that she remains positive on Disney’s ability to hit its fiscal 2024 target of 230 million to 260 million Disney+ subscribers.

She sees a lot of runway for subscriber growth. “Disney+ is currently in only 1/3 of the countries, albeit the larger ones, where Netflix is available,” she said.

Meantime, theme park revenue picked up. Disney Parks, Experiences and Products segment sales rose to $5.5 billion in Q4, vs. $2.7 billion in the prior-year quarter.

For fiscal 2021 Disney earned $2.29 a share, 13% better than fiscal ’20. Revenue for fiscal ’21 grew 3% to $67.42 billion.

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.

Disney Stock Fundamentals — And Earnings

IBD Stock Checkup assigns Disney a 43 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 15th in the 20-stock Media-Diversified group, based on that rating.

A 64 Earnings Per Share Rating reflects a five-year earnings growth rate of -27%, which includes a 19% decline in fiscal ’19 and a 65% drop in fiscal ’20. As noted earlier, fiscal ’21 EPS rose 13%.

Analysts now expect EPS to jump 85% for the fiscal year ending in September 2022, followed by a 36% jump in fiscal ’23, 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.

Since then, Disney cleared several buy points en route to a March 8 record high. It had been consolidating since, most recently below the 10-week moving average. But on Nov. 11, after Disney’s quarterly miss, the stock dived more than 6%.

That undercut the bottom of the consolidation, sending shares to an 11-month low before paring losses. The stock is now more than 25% off its 52-week high, according to IBD MarketSmith chart analysis.

The relative strength line, which compares a stock’s performance to the S&P 500, headed sharply lower but seems to have found a bottom.

So Disney is not a buy right now. But it’s worth watching to see how the media giant fares now that its theme parks, cruises and movie theaters are back in action.

And, don’t forget to keep an eye on the market’s action. The market is in correction right now, which means investors should lock in gains and hold off on new purchases. It’s a good time to freshen up your watchlist. 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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