Walt Disney Co (DIS) — I recommended DIS stock several times in 2014, most recently on Oct. 31. The October sell-off took shares below $80, but they have since recovered, and at current prices, S&P Capital IQ still rates shares a “buy.”
Saying they believe the company can maintain its annual pace of $6 billion to $8 billion in buybacks, Capital IQ analysts raised their earnings estimate for fiscal 2015 (ending in September) by $0.07 to $4.71 per share. They forecast $5.43 per share in fiscal 2016.
For bullish catalysts, they note Disney’s thriving consumer products unit, film pipeline, media networks and upgraded theme parks. Additionally, they expect operating margins to improve in part due to increasing TV retransmission and streaming revenues from Netflix, Inc. (NFLX) and Amazon.com, Inc. (AMZN).
Since my latest report, Capital IQ has raised its 12-month price target by $3 to $98, but the trading target is much higher. Even with the 23% rise in 2014, DIS stock remains a solid technical recommendation.
This Dow 30 member participated fully in the mid-October deep “V” recovery of the Dow Jones Industrial Average and other major indices. DIS stock has gained about 20% since its October low.
The dramatic reversal reestablished its long-term bull channel, reinforcing the support low at $86 and a resistance high estimated at over $105. On Friday, it closed above its 50-day moving average and long-term support line, both at about $91.50, and the October breakout line at $90.
Buy DIS stock at the market with a stop-loss at $85, which should provide plenty of protection for this volatile Dow leader. The trading target is $105, which is 12% above current prices. Investors should hold shares to benefit from long-term growth in the media sector.