Walt Disney Co (NYSE:DIS) is one of the most significant names in the entertainment industry. And given its recent third-quarter earnings beat, you would expect Disney stock to be on a nice run.
Also in Disney’s favor is that it’s a rock-solid large-cap stock with broad exposure and a solid (albeit not eye-popping) dividend. In an increasingly volatile world, DIS is fine company.
However, DIS shares are off nearly 9% for the year — even after the positive earnings surprise.
There’s no doubt that some investors are a bit skittish regarding the outcome of the tragedy regarding the 2-year-old boy and the alligator in its Disneyworld Park in Orlando, Florida. In recent days, it has been revealed that someone had reported the alligator within an hour of the subsequent attack. There’s some fear that this could be a big lawsuit and more importantly, a black eye for Walt Disney World.
But this incident, is just that — a one-time occurrence. This isn’t a pattern of negligence here; DIS is a world-class operation, but it can’t control nature. In all likelihood Disney will settle with the family and put new protocols in place regarding the local predators.
And once the story falls off the front pages, few people will be haunted by the event. The park should be fine.
But this is a good time to get Disney stock, while it’s cheap.
Why Disney Stock Is Bound to Go Higher
There is plenty of positive news on DIS as we move forward that will keep its growth strong.
It opened its China-based Shanghai Disney Resort this year and had over 1 million visitors in just the first 2 months. That’s a pretty bullish indicator of what’s to come. And it has continued to increase park attendance by about 3% a year for the past decade, even in the teeth of the Great Recession.
The Shanghai park has the potential to be a major blockbuster. And it’s more than likely that India may well be on the drawing board.
DIS also bought a 33% share of BAMTech, a streaming company. This is important because cable sports channel ESPN is the biggest share of Disney’s broadcast empire. And it hasn’t been doing well. This is a bold move to transition ESPN beyond cable and create live sports packages that can be streamed to wireless devices.
This is expected to be a huge market in coming years. Plus, it gives DIS a new skill set for all its content eventually. The broadcast version of ESPN (and beyond) now has a new market and a new revenue model. That is a big deal for Disney stock and the company.
DIS’ movie segment is already growing like gangbusters. Profits in the division are up over 60% compared to the same time last year.
So, you have a fast-growing movie division, a strong theme park division and a well-thought out move into the new world of live streaming sports programming. Add to that it’s one of the most stable companies in a very uncertain market.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.
More From InvestorPlace
- Apple’s Touch Disease Problem Is Getting Worse (AAPL)
- Trade of the Day: Facebook (FB)
- 7 Companies That Could Go Bankrupt Soon