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Is Disney Stock A Buy Right Now? Here’s What Earnings, Charts Show

After being closed at various times during the past 18 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

And its quarterly results showed some of those ill effects. But it’s looking forward as Covid-19 cases slow down and countries rush to administer vaccines. That led to a rally in travel-related stocks as restrictions eased, though the rapidly spreading delta variant is raising concerns.

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 have been reopening, which boosts 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 movie also did $78 million in international box office receipts.

And, Disney recently said the Marvel blockbuster raked in $125 million in online revenue.

The “Jungle Cruise” had 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 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.

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 51 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 13th 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 21% in the current fiscal year ending in September, followed by a 107% 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.

Disney stock advanced nearly 11% from the entry, before pulling back to below the buy point. The stock had been building a flat base with a 203.12 buy point, but undercut the bottom of the base. That turned the flat base into a shallow cup pattern.

On July 12, Disney stock rallied more than 4% to hit a two-month high and close solidly above its 50-day line. It’s about 11% away from the 203.12 buy point, according to IBD MarketSmith chart analysis.

After the Aug. 12 earnings beat, shares gapped up and rose nearly 5%, setting up two early entries. A sharp rebound off the 10-week line is one. The other was a move above a short-term high of 186.39, though Disney pared gains and is trading below the entry.

Investors should watch to see if the stock crosses back above the 186.39 early entry,  followed by the 203.12 proper buy point.

But 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 51 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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