Source: PaxForex Premium Analytics Portal, Fundamental Insight
Investors in Walt Disney have enjoyed a remarkable run, reminiscent of a Mickey Mouse March. Earlier this month, the company's shares surged to a 52-week high, and as of Monday's close, they were within 1% of surpassing that milestone. What's driving Disney's exceptional performance this year, with a 26% increase compared to the market's 8% rise? And more importantly, can this upward trajectory be sustained?
The journey to this point is relatively straightforward. Disney's investment performance had lagged behind the broader market for three consecutive years. However, as with most losing streaks, a turnaround eventually occurs. Additionally, the looming resolution of Disney's proxy battle presents a win-win situation, with clarity expected at the upcoming annual shareholder meeting in two weeks. Yet, the crucial question for investors remains: what lies beyond April 3, when the House of Mouse concludes its yearly gathering? The forthcoming answer is likely to be promising.
Over the past couple of months, the argument has been made that investors stand as the clear beneficiaries of Disney's proxy battle. Disney has been exerting significant effort to ensure a steady stream of positive developments leading up to the early April showdown with two activist investor groups.
This effort isn't merely evident in the announcement of a 50% dividend increase in February, well in advance of the semiannual distribution. Nor is it solely demonstrated by outbidding rival streaming services to secure Taylor Swift's record-breaking concert film for Disney+ last week. On Monday, Disney revealed that its recent animated theatrical release, Wish, would debut on its streaming service on the same day as the annual shareholder meeting. This move isn't merely coincidental; it's strategic.
Armed with ammunition, Disney is unafraid to wield it. The company is adeptly leveraging various factors to attract viewers, theme park enthusiasts, and income investors. Positive news typically translates to favorable trading days. The question now is: what lies ahead?
Let's delve into the case of Wish. Some may argue that the decision to highlight the film's release on the premium service is a risky one. After all, the movie didn't perform well at the box office, garnering just $64 million in domestic ticket sales, equivalent to a mere 2% of the US population viewing it on the big screen. Its performance overseas was relatively better but still fell short of financial expectations.
Critics were also largely unimpressed, with only 48% of reviewers tracked by Rotten Tomatoes recommending the film. This contrasts with Disney's typical success in the animated genre. However, the approval rating among audiences who did watch the film in theaters is a more encouraging 81%.
It's unwise to underestimate the potential for a Disney animated feature to gain popularity following a lackluster theatrical release. Encanto, for instance, didn't surpass $100 million domestically upon its late 2021 release but gained significant traction after families streamed it repeatedly on Disney+.
The anticipation doesn't fizzle out post the annual shareholder meeting, which seems to be evolving into a non-event. Glass Lewis, a proxy advisory firm, declared its support for CEO Bob Iger and Disney's board on Monday, essentially marking the end of the skirmish.
Beyond early April, the stream of positive developments is expected to continue. Disney has lined up at least one potential blockbuster theatrical release every month from May through December. While not all of them may hit the mark, they're anticipated to outshine last year's lackluster performance at the box office. Iger remains resolute in his commitment to making Disney+ and its other streaming services profitable by September's end. This strategic move not only addresses a significant critique of Disney's business but also promises substantial bottom-line growth as a formerly draining venture transforms into a lucrative asset.
It's been a promising start to the year for this widely watched media stock, and the best may still lie ahead.
As long as the price is above 105.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 116.06
- Take Profit 1: 120.00
- Take Profit 2: 130.00
Alternative scenario:
If the level of 105.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 105.00
- Take Profit 1: 100.00
- Take Profit 2: 95.00
