Walt Disney Stock Drops. Is Time to Buy? (NYSE:DIS)

Disney Stock Price Chart bull

Walt Disney Co (NYSE:DIS) had an impressive 2019 as the stock rallied by more than 30% as investors reacted to a number of things that went right for the company. For starters, the company scored big as it rocked the box office with six movies, recording the highest grossing. The new Star Wars, despite struggling compared to the previous series, also continued to post impressive results.

We are seeing a dip in Disney’s stock price, but it is very normal for stocks that have gone up so much to take a small dip.  Many technical traders would consider this to be a testing or building of a new support.  Speaking of technicals, the 200 and 10 Simple Moving Averages are signally a buy.  Investors should watch for the 50 Simple Moving Average and Relative Strength Index for signals to enter trades.

Despite attendance at the company’s theme park dipping, the company was still able to post record revenues as folks in attendance continued to spend more on their visits. The company’s media network division also continued to ink acquisition deals as part of an expansion drive. Conversely, the wave of positive developments continued to strengthen the stock’s sentiments in the market.

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Revenue Earnings Growth

Fast forward, it appears the momentum is far off from cooling down. Fiscal first-quarter 2020 financial results have affirmed the fact that Disney is still in a phase of robust growth. The company’s stock edged higher by more than 1% as Q1 2020 earnings per share came in at $1.53 above Wall Street estimates of $1.44. Revenue was also up coming in at $20.86 billion better than consensus estimates of $20.79 billion.

The company’s theme park division recorded a 9% increase in operating income that came in at $2.3 billion. The results could have been much better had the company not incurred additional costs associated with the Star Wars as well as higher wages for union employees

mifinance

Disney also registered a 100% increase in Disney studios operating profit that came in at $948 million. Some of the movies that contributed to the massive increase include Frozen II that brought in $1.4 billion as well a Star Wars: The Rise of Skywalker that brought in $1.1 billion.

According to Chief Executive Officer Robert Iger, Disney had a strong first quarter highlighted by the launch of Disney+. The streaming service has since expanded the company’s footprint into the streaming business, consequently creating a new revenue stream. The company also continued to reap the rewards of an expansive and incredible collection of brands as well as outstanding content from creative engines.

The first-quarter financial results should help strengthen the company’s market sentiments even further. Ahead of the earnings call, there were concerns about the numbers that the company would post, especially on Disney Plus.

The fact that the streamlining service has only been in operation for three months and still able to command a subscription base of more than 28 million subscribers attests to its completive hedge in the industry. According to the Chief Executive officer, the streaming service continues to exceed expectations with the trend expected to continue.

In addition to Disney+ plus fears, there were concerns as to whether Disneyland attendance would bounce back. The earnings results has averted the concerns given the 9% increase in operating income recorded in the division. Disneyland attendance should continue to tick higher in response to the unveiling the new Star Wars ride in January. However, concerns over a weaker slate of 2020 releases could arouse further fears in the market.

Disney Outlook

Going forward, the focus will be on the kind of impact the Coronavirus, which has brought China to a standstill, will have on Disney earnings. The virus has resulted in the shutdown of the company’s minority-owned attractions and theme parks in Shanghai and Hong Kong.

After a slow start to the year that saw Disney pull lower in the markets, the stock has once again started edging higher in response to improving underlying fundamentals. The solid Q1 financial results is the latest catalyst set to continue fueling the upward momentum in line with the long-term uptrend.

Disney Stock Price Recommendations

Nov-26-19 Initiated Consumer Edge Research Overweight $175
Nov-20-19 Reiterated Imperial Capital In-line $141 → $143
Nov-19-19 Reiterated Rosenblatt Buy $170 → $175
Nov-14-19 Reiterated JP Morgan Overweight $150 → $160
Nov-11-19 Reiterated Imperial Capital In-line $139 → $141
Nov-08-19 Reiterated Wells Fargo Outperform $173 → $167
Sep-24-19 Initiated Wells Fargo Outperform $173
Aug-20-19 Reiterated Imperial Capital In-line $147 → $140
Aug-08-19 Upgrade Credit Suisse Neutral → Outperform
Jun-17-19 Downgrade Imperial Capital Outperform → In-line $147
Jun-13-19 Reiterated Morgan Stanley Overweight $135 → $160
Jun-06-19 Reiterated Citigroup Buy $132 → $160
May-07-19 Reiterated Imperial Capital Outperform $139 → $147
May-06-19 Reiterated UBS Buy $128 → $165
May-01-19 Reiterated Barclays Overweight $130 → $150
Apr-23-19 Resumed Guggenheim Buy $157
Apr-23-19 Reiterated BofA/Merrill Buy $144 → $168
Apr-15-19 Upgrade BTIG Research Sell → Neutral
Apr-15-19 Reiterated Imperial Capital Outperform $129 → $139
Apr-12-19 Resumed JP Morgan Overweight $137

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