If You're Only Looking at Disney+ You're Missing the Story of DIS stock

The Walt Disney Company (NYSE:DIS) reports earnings after the market closes on May 13. Many eyes will be watching the new subscriber numbers for Disney+, the company's streaming service. And with good reason. The House of Mouse is now a legitimate competitor in the streaming wars. Favorable numbers will likely break a two-month long downtrend for DIS stock

With that said, there is a possibility that the subscriber numbers could disappoint. If they do, the conventional wisdom suggests that would send DIS stock lower even as other parts of its global business come back online.

However, that is part of the short-term mindset that has overtaken the market. Events like a global pandemic don't come with a template. Investors can't say they've been here before because they haven't. Viewing habits have changed and they're not going back.

But the whole of Disney is stronger than any of its individual parts. Granted some of those parts were largely idle for most of 2020. But like many Disney movies show triumph over adversity, so too will Disney stock. And that remains the story of Disney stock.

Disney is Not Netflix

Netflix (NASDAQ:NFLX) disappointed investors by announcing that their subscriber numbers were pushed forward by the Covid-19 pandemic. As a result, NFLX stock is down nearly 10% since its earnings report.

But the reason why Disney+ represents a threat to Netflix is because it's not Netflix. The company derives a large part of its revenue from areas other than the streaming service. And those areas help to fund the content that Disney will have to create not only for Disney+ but for ESPN and other parts of the company's ecosystem.

Plus, a key demographic for Disney+ is young children which should make the streaming service very sticky. And customer retention numbers will be important to Disney because for many subscribers the free trial period is coming to an end.

What About the Dividend?

I would be shocked if Disney reinstates its dividend. The company suspended the dividend in the early days of the pandemic. That was a prudent move and the company is likely to wait until the business is firing on all cylinders before it starts considering a reissuing. But buy-and-hold investors will have that to look forward to at some point.

Buy in May and Go Away

I'm a Disney bull. That's not to say I think everything the company does is wonderful. Find me any company that you can say that about. I'll wait. However Disney is a forever stock. When families, especially those with young children, say they're going to Florida, you just assume that Disney is part of the agenda.

Patient investors bought the dip in DIS stock in 2020. And they were rewarded. Those same investors can buy into this consolidation in Disney stock and prepare for the next leg higher. For those that are looking for a signal, it does appear that the stock chart is forming a bullish flag pattern.

But perhaps equally importantly I'm looking at the cost of holding the stock if the Disney+ numbers disappoint. In that regard, the stock would likely plunge below its April low of around $178. And in fact, it's likely that the stock could flirt with its year-to-date low around $163.

That's possible. But I'm still willing to turn the old adage on its head. Instead of selling in May and going away for the summer, I'll advise you to buy Disney during this moment of weakness and let it ride. It was a strategy that worked during the pandemic, and history is likely to repeat itself in 2021.

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