Walt Disney (DIS) has had a huge move over the last 52 weeks, rising 125%. The strong move in the stock begs the question — Is there more magic in Disney? The answer to that question is yes, asserts Chuck Carlson, dividend reinvestment expert and editor of DRIP Investor.
Indeed, Disney offers a way to play a variety of themes that continue to catch hold with investors:
➤ The company’s Disney Plus streaming service has more than 100 million subscribers since its introduction 16 months ago.
To put that growth in perspective, it took competitor Netflix (NFLX) 10 years to reach that number. The rapid escalation in the company’s streaming business is one reason for the repricing of these shares.
Indeed, Wall Street has traditionally given Netfl ix a huge valuation — Netflix shares trade at roughly 10 times annual sales.
With the success of Disney Plus has come a higher valuation — Disney currently trades at nearly 6 times annual sales. I think you will continue to see that valuation gap between Disney and Netflix narrow as Disney Plus grabs more subscribers.
➤ The firm’s theme-park business represents perhaps the penultimate “reopening” play. The firm will be reopening its Disneyland theme park April 30. And its Disney World parks, though still under capacity restrictions, are seeing strong demand.
It was reported that Disney World was virtually sold out for spring break. While there is likely to be some weakness in some areas within the leisure and entertainment space even when Covid restrictions are eliminated, I think there is big pent-up demand for Disney’s parks, which should be especially evident by year-end and especially in 2022.
➤ Disney is in a much better position to weather the storm in the cinematic business. The company’s streaming platform provides an additional distribution outlet for its fi lm content, reducing its dependency on theaters.
To be sure, the massive price gain over the last year leaves the stock somewhat vulnerable to broad market corrections. However, investors should stay with their positions in Disney and be willing to add on price breaks below $170.
Disney’s direct-purchase plan has a minimum initial investment of $200. The firm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of $50. There is a $20 enrollment fee.
Purchase fees are $7 ($1 if made with automatic debit) plus $0.02 per share. Selling fees are $20 plus $0.02 per share. The plan administrator is Computershare. For enrollment information call (855) 553-4763 or visit www.computershare.com.
