Get Into Disney Stock Ahead Of Earnings

  • Star Wars was a mega-hit, and will be reflected in Disney numbers to be reported on February 9.
  • Disney stock has fallen on general market weakness and concerns about ESPN and cable cord-cutting.
  • On earnings and ESPN negotiating new rights contracts, the stock will take off.

Times like these are the reason why you always keep some cash in your portfolio.

When the market is tanking, when there is blood in the streets, you wait for the knife to hit the ground and then you pick up some bargains. Walt Disney (NYSE:DIS) stock is currently one such bargain.

Disney stock rose this year on rumors about Star Wars: The Force Awakens, then fell on the news, which is that the picture was a mammoth hit, blowing past Avatar to become the most successful movie of all time.

DIS stock chart

Source: Disney stock price chart by

At the time of writing, Disney stock was sitting at $99.25 (Jan 8 closing price), down from twin peaks of $120 earlier in the year. That’s a Price/Earnings multiple of 20, based on trailing year earnings. The analyst consensus for its next earnings, due on February 9, are for earnings of $1.43 per share, against $1.27 a year ago. Revenue is expected to come in at $14.65 billion.

My guess is Disney will deliver a beat on both these numbers, meaning your near-term deadline for getting into this stock is February 9, when those earnings numbers are scheduled to be announced.

The usual reason given for the stock’s fall, which began in late November, is “cord-cutting” and the subscriber losses at ESPN, the company’s complex of sports networks. Disney also owns some other channels subject to cord-cutting, including its flagship Disney Channel, A&E, and ABC Family. It also owns the ABC Television Network, which was previously disintermediated by cable.

Disney has resisted the urge to own its own infrastructure, like Comcast -A (NASDAQ:CMCSA) and Twenty-First Century Fox (NASDAQ:FOX), focusing instead on downstream monetization through toys and its theme parks. Those who went to see Star Wars were treated, before the show, to a host of trailers for upcoming Disney movies, most involving the popular Marvel franchise, bought for $4 billion in 2009, three years before it bought Lucasfilm for about the same price. (Some of the Lucas price was in stock, which has since doubled in value.) Many forget that the buying binge started in 2004, when Disney bought The Muppets under former CEO Michael Eisner.

Disney, in short, has rights to most of the durable characters your kids love, and has proven fully capable of fully monetizing them, right down to Miss Piggy’s squeak. Licensed characters tend to have a very long shelf life, and that life is extended when new products are built around them, even if these efforts fail in first run, as ABC’s re-boot of The Muppets TV series failed.

With the S&P 500 trading at a Price/Earnings ratio of 21.74, Disney stock at 20 is a bargain, especially given its proven capability of expanding earnings. Once the high-priced sports contracts ESPN bought over the last few years come up for renewal, at more reasonable prices, Disney stock is going to really take off.

Show Full Article
5 2
Is this article helpful ?    

Author's Disclosures & Disclaimers:
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
Amigobulls Disclosures & Disclaimers:

This post has been submitted by an independent external contributor. This author may or may not hold any positions in the stocks discussed. Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. Amigobulls has not verified the author’s positions in the stocks discussed, and does not provide any guarantees in this regard. The author may be paid by Amigobulls for this contribution, under the paid contributors program. However, Amigobulls does not guarantee the authenticity or accuracy of the information provided by the author in this post.

The author may not be a qualified investment advisor. The opinions stated in the post should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Amigobulls does not have any business relationship with any of the companies covered in this post. This post represents the views of the author/contributor and may not reflect the views of Amigobulls.

show more

Comments on this article and DIS stock

user profile picture
A company that makes you happy and gets you out of yourself.....there is something to be said for that!!
1 reply
user profile picture
This stock deserves a huge increase with the earning report !! It has been very unfairly undervalued even as 22 of the leading investment firms including JP Morgan and the Bank Of America have reaffirmed confidence in it which gives it a buy rating overall with projections as high as 130 dollars a share. The wall Street Journal and Barrons call it a buy. So many finance agencies and banks continue to add shares to their portfolio's. Disney has added 12 million new international Espn subscriptions over the last year which wipes out any domestic "losses". The brand is strong and ever seeking new markets for its products!!
1 reply
Do share this awesome post