After absorbing the severe market shock of the COVID-19 crisis, Walt Disney (New York Stock Exchange: DIS) continued to bring amazing profits. DIS’s stock price peaked at he topped $200, an all-time high for the company. Essentially, Disney was offering cheap in-home entertainment that resulted in a premium charge during the shelter-in-place period. This narrative took a hit following the easing of COVID policies, but economic pressures make the entertainment giant important again.
Disney+, Disney’s streaming service, which launched in November 2019, has already garnered a lot of attention. In addition to bringing meaningful competition to the streaming arena, Magic Kingdom provided an unparalleled library of content. Leveraging the Marquee franchise will allow Disney to compete with giants in the fast-growing streaming market. In fact, management did just that with the introduction of the Star Wars-themed “The Mandalorian.”
DIS shares received no volatility immunity when the COVID-19 crisis first upended the US economy. But as investors took a breather during his spring 2020 downturn, they found some companies ironically benefiting from the pandemic. Essentially, Disney was now attracting audiences, especially since live sports events were canceled at the time.
As wall street journal He pointed out that this is bad news for cable TV providers. However, DIS’s stock has benefited because it allows the underlying company to continue delivering already-produced content from its massive media empire.
Unfortunately for Disney, consumers were desperate to get out of their homes as the fears of COVID-19 faded. After all, the American collectively endured about two years of his cabin fever. Soon, a new term appeared in the pop culture lexicon. It’s a revenge trip, or a desire to seek out an experience denied by the pandemic.
Perhaps not coincidentally, the DIS stock has lost more than 36% year-to-date. However, the stock has fallen just 1% in the most recent month, which could indicate a shift in sentiment.
Entertainment goes home for DIS shares
On paper, the latest data on the employment situation could bode well for revenge trips, which could hurt DIS inventory. Nonetheless, overall, the situation favors cheap home entertainment platforms, making Disney an interesting contrarian opportunity.
To be fair, Hint Rank Reporter Kailas Salunkhe said the November jobs report was hotter than expected. The U.S. economy added his 263,000 jobs, well above Wall Street’s projection of his 200,000 jobs. But the devil is in the details.
According to Saranke, “the leisure and hospitality, healthcare and government sectors saw strong job gains, while sectors such as retail, transportation and housing saw declines.” While businesses large and small are working to reduce their workforces, mid-sized facilities appear to have fared well during this period.”
In other words, many high-paying white-collar jobs have suffered losses. Filling the gap are low-paying occupations such as retail. Essentially, this development could help DIS inventory at the expense of companies profiting from revenge travel. Interestingly, the US Global Jets ETF (NYSEARCA: Jets) is decreasing by about 14% over the year.
So it’s entirely possible that collective discretionary funding for big-ticket items and experiences has been significantly reduced. Adding to this speculation, the personal savings rate, which surged to a record high in April 2020, hit near an all-time low recorded as of the most recent reading (October 2022).
Frankly, not many people have the funds to spend their holidays in exotic locations. However, most people should have enough money to spend a few bucks each month on quality streaming entertainment. Again, combined with Disney’s marquee franchise, the company can offer escapism in difficult times at very attractive rates.
Buy or sell DIS stock?
Turning to Wall Street, DIS stock has a strong buy consensus rating based on 17 buys, 4 holds and 0 sells allotted over the past three months. The DIS has an average price target of $121.35, suggesting a 29.84% upside potential.
Quantitative data supports the Disney paradox
To be fair, DIS stock may tweak the financial component of the investment proposal a bit. Still, investors have some positive attributes to work with. The company continues to provide decent income statement metrics. For example, Disney’s three-year earnings growth (on a per-share basis) is his 2.7%, which actually outperforms his competitor’s nearly 63%. Also, its net profit margin is his 8.2%, beating almost 64% of the players listed in the diversified media industry.
To be honest, these aren’t wildly positive stats. But with a fundamental Catalyst in favor of the Magic Kingdom, it could be more than enough for the DIS inventory.
Disclosure