Don't Buy Disney Just Yet

Long-term Disney (DIS) investors are undoubtedly very happy with the stock’s performance. Disney has appreciated consistently and is up over 6,000% in the last decade. While both the company and the stock has performed very nicely in the reference period, I think the stock is overvalued at the moment and investors should wait for it to fall so as to initiate a long position. All the good news has already been priced into the stock, and investors may be underestimating the threat that Comcast posts.

Disney possesses the rights to various most prevalent franchises and fictional characters such as Mickey Mouse, Elsa etc. in the entertainment industry.
The company continues to take advantage of its assets through various platforms like video games, movies, merchandising, live shows, and theme parks.

Disney’s management is performing very well at turning the company’s robust strength into rising sales and earnings for stockholders. Furthermore, investors are eagerly waiting for the launching of the Disney’s new Star Wars movie, The Force Awakens, on December 18, as the company expects movie a major blockbuster. The movie should profit the company’s studio segment considerably, and the merchandising segment is already benefiting from rising demand for Star Wars products all over the world. However, as mentioned above, I think all the good news has already been baked in Disney’s share price.

On the other hand, primary rival of Disney, Comcast, is taking various steps that are heating up competition in Central Florida. Comcast’s Universal Orlando comprises of fire-breathing dragon appealing tourist eager to explore previous year’s expansion of The Wizarding World of Harry Potter.

Moreover, one huge barrier for the company can be Skyplex complex whose proposed development was recently approved by the Orange Country commissioners. Skyplex complex include record breaking 501-foot roller coaster. It will take around 2-3 years to complete its construction, and a lot can change between this time period.

Comcast is aggressively putting efforts to beat Disney by expanding its theme parks, which includes its escalated overnight guest capacity by constructing new hotels, in-situ water park that will inaugurate by the summer of 2017. It looks like Comcast strategy is working, as Universal Orlando’s theme park has witnessed great growth in crowd, outpacing Disney’s iconic resort.

Disney is also planning to open its first theme park titled as “Shanghai China” in Mainland China. This project accounts for the company’s largest projects ever, and it possibly will provide the access to thrilling growth prospects overseas. But as of now, it looks like increasing competition will keep a lid on Disney’s share price, which is why I think investors should look for a better entry point.
Published on Dec 9, 2015
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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