Buy Disney’s Drop or Regret It Later

Recently Disney (DIS) reported its second quarter results. The company’s revenue surged 4.1 percent and adjusted earnings escalated 10.6 percent. Considering Disney’s huge size, the results were terrific. Disney’s sports cable network ESPN’s subscriber count has been declining from quite some time, but the company is still performing exceptionally.

That being said, the Market didn’t see Disney’s quarter as anything exceptional. Since the company missed on earnings estimates, shares tanked almost 5% after the results.
For long-term investors, Disney’s drop is a great opportunity as the stock generally follows the uptrend in the long-run. Accumulating winning stocks on irrational pullback has always proven to be a winning strategy. Investors buying Disney at current levels can’t lose as the company has several growth prospects up its sleeve.

Disney is belligerently chasing opportunities that will allow it to prosper in varying market conditions. These include ESPN in skinny bundles proposed by Sony and Dish Network, conveying to have it included in other light bundles, and traversing further direct to customer subscription streaming facilities further than DisneyLife in the United Kingdom. The expanded cable bundle will endure to be the leading consumer media product for approximately the upcoming five years.

On the other hand, Disney’s consumer products and interactive division’s operating income plunged 8 percent as compared to the year ago period. This division is comprised of Disney’s profitable licensing segment. On a comparable basis, the company’s licensing revenue surged 18 percent in the second quarter. The main reason behind this surged licensing revenue was the robust prevailing demand for Star Wars merchandise, somewhat equipoised by the tough y-o-y Frozen comparison.

Apart from these, Disney’s studio generated strong results with operating income up 27 percent as compared to 2015. The progress in operating income was mainly due to the global theatrical success of Star Wars: The Force Awakens and Disney Animation’s Zootopia. The company is off to a record start with more than $1.5 billion in operating income because of the remarkable performance of its film slate.

Disney’s success is an outcome of its tactic of producing high-quality movies and leveraging that achievement through several of its integrated businesses. The company has done a great job in producing, enlightening and extending the value of a franchise.


I find Disney’s recent pullback irrational and see it as a golden opportunity for long-term investors. Although Disney’s size is huge, it can continue growing and also has a generous dividend yield. This makes it a perfect stock for long-term as well as defensive investors.
Published on May 25, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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