Today I’m writing about why I am investing in Disney stock today. This seems hypocritical, given my post on investing rules, right? Hear me out. You should still invest most of your money into cheap index funds or ETFs. However, when a good deal presents itself and you have some investing “fun money” it’s a good way to get a bonus. Right now, Disney stock is on sale. This is an opportunity to buy shares of an iconic and dominant company, low.
Disney came on the scene in the early 1920s – first with the Alice cartoons. Since then, Disney has become an entertainment behemoth with theme parks, a cruise line, cartoons, merchandise, movie studios, they own several networks and their own streaming service. In entertainment, Disney is a dominant company. Disney has put out or owns some of the most popular movies of all time including Star Wars. Not only that, they own Marvel, 21st Century Fox, Pixar, ABC, and they have a majority stake in Hulu and ESPN to name a few.
COVID and Disney
Disney shares took a huge dive during the height of the pandemic, cratering at about $86 on March 20, 2020. Just about a year later it had gone up to $200. Today, December 6, 2021, the stock is trading at about $150 a share – it took a big dive over the last several weeks because new subscriptions to it’s Disney+ streaming service weren’t as robust as analyst’s expectations. Also, the new Omicron variant has debuted in the United States and the markets are bracing for another series of lockdowns that will inevitably disrupt Disney’s theme parks, properties, cruises and sales in general. At close to a 52 week low, Disney may be at a good opportunity to buy.
Disney had a bad quarter
Let’s first take a look at Disney’s streaming platform. New subscribership was up, but only went up from 116 million subscribers in June to 118 subscribers at the end of September. This was far below Wall Street expectations of 126 million. If you look back to a year ago, the growth has been dramatic – last year Disney had 73.3 million subscribers and now has just under 120 million. That’s pretty magical, if you ask me.
Next, Disney’s financial results fell flat. Wall Street estimates were forecasting 44 cents a share and Disney’s actuals were about 37 cents a share. Overall, it beat quarterly revenue estimates by almost $2 billion.
Disney is still hamstrung by COVID and isn’t operating at full capacity and has more operating costs.
The new Omicron variant is spreading across the US. It’s currently headline news. The threat of new lockdowns and fear that vaccines won’t be able to subdue this variant are rampant. Over the last couple of weeks, tech stocks and entertainment stocks, like Disney, have had a huge drop in stock price. Investors are fearful that Omicron will disrupt Disney. These investors are especially skittish because of lackluster 4th quarter results. The fear is Omicron could eat away at Disney’s gains and disrupt operations.
When Others are Fearful…
I think Disney is being unfairly sold right now. As a parent, the lure of bringing your child to Disney and desire for a child to watch Disney programming is nearly an every week discussion. Last quarter was a relatively slow period for content releases which helps explain the slow growth in subscribership. Further, the panic over Omicron meant investors panic sold shares of stocks like Disney. December is going to have more anticipated content releases, including the Boba Fett series and Hawkeye. Also, with vaccination rates at nearly 60% in the United States, I think the Omicron variant is a little over blown. I don’t think shutdowns are on their way and I don’t think this variant is going to materially effect Disney’s on going businesses negatively.
I’m buying Disney
Now, I could be completely wrong and Omicron could ravage the US with a new series of lockdowns and decreased productivity. Disney+, Hulu and ESPN+ could all nose dive in terms of revenues and subscriptions because of poor management and content. Disney parks could close indefinitely. You could lose all or some of your money if you invest in Disney.
Or, we might be buying Disney at an opportune time. I’ll be buying a handful of shares today, and I bought a handful of shares last week. I don’t like going all in and buying 100 shares at a time. I’m buying about 10 to 20 shares at a time.
I believe Disney is going to be able to weather this storm. It had a lackluster quarter and Omicron scares are attacking its share price. I’ve bought some shares of Disney last week, and I’m buying them again today. I’m bullish on Disney. The stock dip we’re seeing, I believe, is temporary. Disney’s share price is poised to peak again after Omicron scares subdue, operations return to normal and content releases spur new subscribership. When other’s are fearful it’s a good time to get greedy.