Walt Disney (DIS) is trading close to a buy point, after coming back more than 60% from its post-coronavirus crash lows in March.
It’s been a wild ride on Wall Street since February, as the stock market fell into a bear amid the coronavirus crash. Disney stock got slammed as the Dow Jones 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 the world tries to shift into a post-coronavirus mode, even though Covid-19 cases and deaths continue to rise.
On May 11, Shanghai Disneyland opened for the first time since late January, with limited capacity. Masks and social distancing measures were enforced. Tickets sold out within minutes for opening day.
Hong Kong Disneyland reopened in June but closed in July, due to new restrictions set by government and health authorities in Hong Kong. It reopened again Sept. 25.
The media and entertainment giant reopened Walt Disney World’s Magic Kingdom and Animal Kingdom July 11. Epcot and Hollywood Studios followed suit on July 15. But its California theme parks and resort hotels have been closed since mid-March.
Under new guidelines set forth by California Gov. Gavin Newsom on Tuesday, Orange County-based Disneyland may not open until the county goes into the least restrictive tier. It’s currently in a more restrictive tier in the state’s four-tier system.
On Sept. 28, Disney announced it’s axing 28,000 theme park jobs. It said in a statement that coronavirus uncertainty was “exacerbated in California by the State’s unwillingness to lift restrictions that would allow Disneyland to reopen.”
And last week, Disney announced a major reorganization, which boosted shares 3% the next day.
Does that mean Disney stock is a buy right now? Read on to find out.
Good News For Disney+ Fans
On July 3, the movie version of blockbuster Broadway hit musical “Hamilton” began streaming only on Disney+. It was originally planned to hit theaters in October 2021. The film stars the original cast including Lin-Manuel Miranda and Daveed Diggs.
“In light of the extraordinary challenges facing our world, this story about leadership, tenacity, hope, love and the power of people to unite against the forces of adversity is both relevant and impactful,” Executive Chairman and former CEO Bob Iger said in a statement.
Disney reportedly paid $75 million for the worldwide distribution rights to the musical, which won 11 Tony Awards in 2016 and the Pulitzer Prize for Drama. As expected, “Hamilton” reportedly drove more subscribers to Disney+.
After the movie’s global launch, the Disney+ app was downloaded more than 752,000 times between Friday and Sunday (July 3-5), according to TechCrunch, based on Apptopia data. The U.S. accounted for 458,000 of the downloads.
That marked a 74% jump in new weekend downloads in the U.S. vs. the prior four weekends in June. Since Disney had ended its free trial week ahead of the “Hamilton” debut, the downloads are all paid subscribers.
Coming To A TV Near You …
Disney’s tent pole live-action movie “Mulan” went straight to Disney+ as a one-time premium offering in most markets. It was released Sept. 4 in the U.S., Canada, Australia and New Zealand for $29.99. The movie’s launch had already been delayed for months due to the pandemic.
Disney+ downloads jumped 68% following the movie debut, according to researcher Sensor Tower.
Disney plans to roll out a new Star-branded streaming service next year, tapping content from ABC Studios, Fox Television, FX, Freeform, 20th Century Studios, Searchlight and other Disney-owned assets.
Disney on Oct. 9 said its latest Pixar movie, “Soul,” will skip movie theaters and debut Dec. 25 on Disney+.
On Oct. 12, Disney announced plans to focus primarily on its streaming business, due to “the tremendous success achieved to date in the company’s direct-to-consumer business and to further accelerate its DTC strategy.”
It created a centralized global distribution group that will be headed by Kareem Daniel, formerly president of consumer products, games and publishing.
The announcement comes as most movie theaters and many theme parks remain closed or are open with limited capacity.
Iger Back In Control, For Now
On April 12, the New York Times reported that former CEO Bob Iger is reasserting control at Disney in his new role as chairman. Iger has “effectively returned to running the company” to help out new CEO Bob Chapek amid the coronavirus crisis, the New York Times said.
“A crisis of this magnitude, and its impact on Disney, would necessarily result in my actively helping Bob (Chapek) and the company contend with it, particularly since I ran the company for 15 years!” Iger told the New York Times in an email.
The media giant made headlines Feb. 25 when Iger stepped down, effective immediately. Chapek, chairman of Disney Parks, Experiences and Products, was named the new chief executive. Iger will stay on until the end of 2021 as executive chairman and direct Disney’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 Disney’s movie universe, and launched Disney+.
Disney stock fell 2% after hours Feb. 24, the day of the announcement. But the next day, several analysts including Morgan Stanley, Citigroup and Merrill Lynch reiterated buy ratings on the stock.
Disney+ Continues To Grow
After the close Aug. 4, Disney reported a surprise fiscal Q3 profit of 8 cents a share. That’s a 94% drop from the same year-ago quarter. But analysts expected a loss of 43 cents a share.
Revenue tumbled 42% to $11.78 billion, missing Zacks Investment Research estimates for $12.65 billion. Parks revenue sank 85% to $1 billion, while movie studio revenue fell 55% to $1.7 billion.
Disney+ had 60.5 million subscribers as of Aug. 3, up from 54.5 million in early May. The media giant’s prior forecast called for 60 million-90 million subscribers by 2024.
“As our global sub numbers continue to grow, we’ve also exceeded our internal subscriber projections in every major market we’ve launched thus far,” CEO Chapek said on the earnings call. “We will continue our international expansion with the launch of Disney+ in the Nordics, Belgium, Luxembourg and Portugal in September and in Latin America this November.”
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 41 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 11th in the 26-stock Media-Diversified group, based on that rating.
A 21 Earnings Per Share Rating reflects a five-year earnings growth rate of -1%, which includes a flat result in fiscal 2017 and a 19% drop in fiscal 2019. Analysts expect a 74% EPS drop in the current fiscal year ending in September, followed by a 73% increase in fiscal 2021, according to FactSet.
Is Disney Stock A Buy?
After breaking out from a flat base and rising to record highs in November, Disney stock tumbled more than 40% during the coronavirus market crash. It found a bottom on March 18 and has been trending mostly higher since.
On Aug. 5, following the earnings surprise, the stock cleared the buy point in heavy trade. It closed the session slightly below the entry, but broke out again the next day, in weak volume.
On Sept. 21, Disney stock gapped down and fell below its 50-day moving average as the broader market sold off. That brought it back below the 127.92 buy point. It’s been hitting resistance near the 50-day line since.
So, Disney stock is no longer in potential buy zone. It could retake the buy point again, though all purchases are highly risky with the market in correction. And its 21 EPS Rating and 41 Composite Rating are well below the 80 minimum of most leading growth stocks.
But Disney stock remains one to watch as it holds close to a buy point.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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