Today I added to a previously held model position in Disney, for some of my clients that did not already own the stock. This is something I rarely do, but I think that lately Disney is irrationally out-of-favor for the following reasons:
- Other media companies are struggling and fear has tainted the sector.
- Concerns over ESPN “cord cutting” remain, but this is an old story line and I think easily rectified.
- Hype that theme park attendance is down; however, this was a planned strategy by Disney to raise prices because parks are at capacity and they wanted to make the customer experience better by reducing line wait times. Park margins are way up, evidence of Disney’s pricing power…which is lacking in so many other consumer discretionary sectors.
The stock price is also displaying support:
- 200 day moving average.
- Short term horizontal trend line.
- Long term 4 & 8 year moving averages.
This is not to say the stock can’t go lower, but it’s a quality blue chip with a bright future. Note the above charts from www.finviz.com. Disney has a history of increasing Earnings & Revenue, while at the same time reducing shares through buybacks.
I believe the near term upside from here is at least 15-20%.
As always, you should do your own homework and invest with caution.
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