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Disney: Don’t Let the Delta Variant Discourage You
Stock Analysis & Ideas

Disney: Don’t Let the Delta Variant Discourage You

Along with cruise ships and airlines, theme parks might be the ultimate recovery investment in the wake of the COVID-19 pandemic. Of course, there’s no company with a bigger presence in theme parks than The Walt Disney Company (DIS).

Don’t misunderstand – Disney is also a thoroughly modern company with a firm and growing foothold in the content-streaming revolution. In other words, even if the post-pandemic return to normalcy is stalled, Disney is sufficiently diversified to withstand the rough patches.

That being said, it’s understandable if Disney’s stockholders are rooting for a swift return to pre-pandemic conditions. Unfortunately, though, the emergence of the Delta variant strain of COVID-19 may negatively impact Disney’s bottom line.

That’s a harsh reality, and one that Disney’s investors will have to face. Nonetheless, there are reasons to stand by Disney, and even expect the company’s growth trajectory to persist despite the challenges. (See Disney stock charts on TipRanks) 

A Quick Look

Is DIS stock stalled out, or just taking a breather? The answer depends on your perspective.

There’s no denying that from mid-May through early August, Disney stock went absolutely nowhere. For months on end, the share price just ground sideways, clinging to the $175 level.

That type of price action (of lack thereof) can be frustrating. Yet, patience is the key that unlocks the biggest gains in the financial markets – and a generous helping of big-picture perspective doesn’t hurt either.

Think of it this way: DIS stock rallied from $118 in late October of last year, to the $175-ish price where it stood in August. That’s a gain of around 48% in less than a year.

That’s an astounding rate of return for a so-called “safety stock.” Hence, it’s perfectly natural and sensible for Disney stock to take a breather and go sideways for a while.

Also, as the old saying goes, “The longer the base, the higher in space.” This means that a long period of sideways action after a rally might just be the launching pad for another big leg up.

Annual Passes Are Back

Skittish Disney investors might be looking around for signs that folks are ready to enjoy theme parks again.

So, here’s one: annual passes are back at Disneyland, after the program was suspended in January.

Or at least, they’ll reportedly be back soon, with modifications. Apparently, Magic Key holders will now need to make advance reservations to the park.

Additionally, you may or may not like the new pricing schedule. Disneyland’s new annual passes will start at $399 per year for Southern California residents. However, the price tiers for pretty much everyone else will be $649, $949, and $1,399.

Still a Box-Office Titan

Remember, Disney is more than just theme parks. The company is also a cinematic giant with year-round box-office hits.

During the final weekend of July, Disney’s Jungle Cruise outperformed all other movies at the U.S. box office with $34.1 million in ticket sales from a 4,310-screen engagement.

Jungle Cruise is a popular ride at Disney’s theme parks, so it’s evident that the company remains masterful at cross-promotion.

The company also knows how to milk a movie for all it’s worth. Disney reported around $30 million in global fees for the streaming release of Jungle Cruise, as the company charged Disney+ subscribers $30 to watch the film at home.

During that same weekend, Disney’s Black Widow took the fourth ranking among U.S. cinematic releases, generating a respectable $6.43 million.

Wall Street Weighs In

According to TipRanks’ analyst rating consensus, DIS is a Strong Buy, based on 17 Buy and three Hold ratings. The average Disney price target is $210.67, implying 18.9% upside potential.

The Takeaway

Is Disney an old standby for safety-stock investors? Or is it a thoroughly modern company with a diversified range of assets?

It’s actually both of those, and much more. So even if the return to normalcy falters, you can still hold your DIS stock through life’s unpredictable events, both good and bad.

Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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