The Gradual Return to Normal Will Push Disney Stock Higher Again
InvestorPlace - Stock Market News, Stock Advice & Trading Tips DIS stock has gone nowhere for months on end, but Disney is pulling in revenues with a combination of digital...
Disney (NYSE:DIS) is among the hardest-hit businesses in the wake of the Covid-19 pandemic. As such, owning DIS stock wasn’t an easy proposition for much of 2020. However, it eventually experienced an impressive rebound. The question today, then, is what should you expect from Disney moving forward?
Disney’s strategy to provide a magical experience, along with something relatively “normal,” is twofold. The company has reopened its theme parks, but it’s also generating revenues from digital services like Disney+ and Hulu.
DIS stock has traded in a tight range for a while, leading some investors to wonder whether a breakout will ever happen. Just keep in mind, the market is designed to test your patience — and sometimes, winning means just holding the line.
Besides, there are signs that some pre-pandemic features are returning to a very popular Disney theme park in Florida. So, give your investment some time to work out in your favor — and remember that people will always seek out entertainment, even in the most challenging conditions.
DIS Stock at a Glance
Rewinding the clock, we can recall how painful it was when DIS stock dropped from $152 in November 2019 to a low of around $85 in March 2020.
As it turned out, panic-selling wasn’t the best course of action. Impressively, the stock regained the $150 level by the end of November 2020. Moreover, it even reached an astounding 52-week high of $203.02 on March 8, 2021.
Since then, however, the price action has been uninspiring. It’s not exactly a bear market, but DIS stock has stayed in a tight range and can’t seem to break out of it.
The $200 level is the most obvious resistance level to watch. The buyers will need to push above that price point on heavy trading volume and stay there for a while, before targeting $215 and $225.
By the way, if you’re wondering about Disney’s dividend going forward, CEO Bob Chapek provided some clarity on that issue:
“[T]he clear priority is funding our new growth businesses that we’ve got. But once we get to a point where, again, our cash flow is funding that, handling some of the debt that we’ve got, then everyone agrees that it would be a great thing to reinstate that dividend and do share buybacks. But that’s sort of in the distant future.”
In other words, the dividend payouts could be lacking for a while. Therefore, DIS stock will need to appreciate in price if the investors are to reap any profits.
Just as the economy is gradually getting back on its feet, so is Disney.
Chapek and his company have been responsive to the customers’ wants and needs, introducing “exciting new experiences at our parks and resorts worldwide, along with new guest-centric services.”
This strategy seems to be paying off. During the second quarter of 2021, Disney Parks, Experiences and Products revenues increased to $4.3 billion. That’s a huge improvement compared to the $1.1 billion recorded in the prior-year quarter.
But don’t get the wrong idea. Digital entertainment has been just as important to Disney’s bottom line as the “new experiences” at the parks and resorts.
As Chapek boasted, Disney totaled nearly 174 million subscriptions across Disney+, ESPN+ and Hulu at the end of 2021’s second quarter.
Meeting, Greeting and Socially Distancing
Year-over-year, Disney+ paid subscribers more than doubled to 116 million. Meanwhile, the paid subscribers for Hulu increased by 21%, to 42.8 million.
Another highlight of that quarter was the 57% increase in Direct-to-Consumer revenues, which came to $4.3 billion.
So, Disney’s well-oiled machine is still humming along nicely.
At Florida’s Walt Disney World, the company is even bringing back indoor character meet-and-greets in November. It will be slightly modified this time around, though.
Don’t expect any hugs or autographs, as guests will be kept at a safe distance, Disney said.
Disney also reported that more than 50,000 cast members have returned to work since last summer. Plus, over 65,000 cast members are currently working across the resort.
Can we call this a complete return to normalcy? Not really.
Yet, it’s all about the baby steps. Disney is still responsive to its customers, who want to enjoy the real-life and digital experiences that Disney has to offer.
At the same time, DIS stock needs time to stage a breakout. In due time, a little bit of market magic should send the share price higher.
On the date of publication, Louis Navellier had a long position in DIS. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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