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Today, we’re opening a new bullish trade on Walt Disney (NYSE:DIS). DIS has been on a box-office roll for the past two months. “Doctor Strange” kicked things off, pushing the company above $2.3 billion in domestic box office sales for the first time ever. “Moana” came next, pulling in $81.1 million over the Thanksgiving weekend (the second highest all-time, behind Disney’s “Frozen”). Last, but certainly not least, “Star Wars: Rogue One” pulled in a huge $155 million on its opening weekend. This string of successes, coupled with a 9.9% dividend hike earlier this month has pushed the stock back up toward the highs it saw in early May. We expect DIS to continue climbing and ultimately pass those highs.
One of the biggest concerns investors have had for DIS is the decline in ESPN subscribers. ESPN lost 2 million subscribers during fiscal 2016 as more and more consumers cut the cable cord. However, bullish statements from Disney CEO Bob Iger about the future outlook for ESPN during the company’s most recent earnings announcement seem to have lifted much of the concern over ESPN. Some are even speculating DIS may look to spin off ESPN. This renewed confidence in a major profit center for the company, along with strong consumer confidence, which should be a boon for theme parks and DIS’s other entertainment properties should provide additional lift for the stock.
DIS recently broke out of a bullish continuation pattern. Based on the $5 move from $100 to $105 that occurred before the pattern formed, we expect DIS to move another $5 from the stock’s breakout point at $105, giving us a price target of $110.
‘Buy to open’ the DIS February (2017) 110 Calls (DIS170217C00110000) for a maximum price of $1.35.
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