Whether one holds a bullish or bearish view on Disney (NYSE:DIS), all can agree it has garnered its share of controversy. The latest news comes from its usually quiet Parks, Experiences & Consumer Products division. Disney stock rose following a price increase at its theme parks. Still, this has led to speculation on whether customers will continue flocking to Disney’s parks in large numbers.
I believe bears have forgotten the staying power of Disney’s brand. Amid controversies and various uncertainties, DIS stock remains positioned to grow and profit investors for years to come.
Theme Parks Have Become a Focal Point
In recent years, divisions such as Studio Entertainment and Media Networks defined the performance of Disney stock. Those divisions have often struggled with failed films or cable-cutting. Its Parks, Experiences & Consumer Products division performed well through it all. Although this division attracts less attention, it has usually posted double-digit profit increases. The fact that DIS owns the five most popular amusement parks in the world certainly helps.
However, a price increase at Disney’s theme parks has again brought attention to this division. Even the lowest-cost package will set consumers back more than $100. Disney stock surged by more than 1% following this news. Still, with the price of some tickets rising by more than 10%, many see this as a controversial move.
Many Remain Bearish on Disney Stock
Moreover, not all investors hold bullish views on DIS stock. Our own Dana Blankenhorn refers to the equity as “speculative.” Like Mr. Blankenhorn, I see theme parks as the strong point for Disney stock. He is also correct to point out that tensions across the world continue to rise. For this reason, terrorism at Disney parks remains a threat. Though none of us want to think about such a tragedy, sadly, this remains a risk to owners of Disney stock and investors in general.
He also cites the usual focal point of Disney stock — media content. It is true that ESPN+ — and likely Disney+ as well — will bring lower revenues per customer than the cable channels they replace. Mr. Blankenhorn also expressed concern that Disney’s content would lose its appeal over time. Likewise, InvestorPlace feature writer James Brumley expressed concern about content spending and rights. He specifically mentioned the content purchase from Twenty-First Century Fox (NASDAQ:FOXA, NASDAQ:FOX). It is not clear how much of the Fox content will appear on Disney+.
Disney Should Continue to Thrive on ‘Timelessness’
While my colleagues make some excellent points, I still see DIS stock as a buy on any pullback. Despite the expense, families will continue to flock to Disney parks and embark on Disney cruises. Also, I differ with my colleagues regarding the media content. Disney’s movies and television programs tend to hold multi-generational appeal and have done so for decades. This “timeless” quality also applies to much of the content it later purchased. Both Lucasfilm and Marvel enjoyed decades of success before becoming part of Disney.
This may not apply to its peers. Although Netflix (NASDAQ:NFLX) has developed award-winning content, we do not yet know whether its current programs will appeal to consumers decades from now. The same holds for content created by Amazon (NASDAQ:AMZN) and AT&T (NYSE:T) in its Time Warner division.
Finally, unlike the cost of theme park admission, consumers can buy Disney stock at a reasonable price. It currently trades at price-to-earnings (PE) ratio of about 13.5. No, its predicted average growth rate of 7.3% per year over the next five years will not compare to AMZN or NFLX. However, buyers of DIS stock know they are buying timeless content and the cash flow coming from the company’s vast array of offerings. This should keep long-term Disney investors in good shape even if the stock struggles for now.
Bottom Line on Disney Stock
Amid issues regarding its content and theme parks, the timeless quality of its programming will drive Disney stock higher over time. Yes, the higher cost of visiting Disneyworld will sting consumers. Also, how ESPN+ and Disney+ will ultimately perform remains in question.
However, Disney stock has enjoyed decades of gains on the company’s most enduring quality — timelessness. Most every native-born American alive today grew up on Disney movies and dreamed of visiting a Disney theme park. That appeal has extended across the world and shows no signs of going away.
Disney may face its share of challenges. However, customers will likely keep returning to Disney, and hence, DIS will continue to deliver returns to long-term holders of its stock.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
