Stir in risk, with no dividend payouts, and you’ve got yourself a wild adventure with an investment in The Walt Disney Company!
The Walt Disney Company (NYSE—DIS)
Analyst, Marc Johnson upgraded American Key stock The Walt Disney Company to a Buy, no longer a Hold, but that’s only if you need no dividends and can accept some risks.
Very recently, several factors have sent the shares up. One is the return of the successful former Chief Executive Officer, Robert Iger. He’s expected to retrace some of his predecessor’s perceived missteps. One example he’s already demonstrated is a planned big jump in the price of Disney’s streaming service. This would lead subscribers to cancel their service or switch to competitors.
A second positive development is the relaxation of COVID-19 travel restrictions. This lets more Americans and foreigners visit theme parks such as DisneyLand in California and DisneyWorld in Florida. Fewer restrictions are also helpful to its movie and cruise businesses, among others.
This year, Disney’s earnings are expected to advance by over 15 per cent. Next year, Disney’s earnings are expected to surge even more. The company anticipates reasonable rise in share prices considering its rapid earnings per share growth.
After rising so much, Disney’s shares also now have upward share price momentum. Once this sets in, the shares can just continue to go up, even past the point at which they seem fairly valued. Just keep in mind that there are some risks with Disney. Obviously, these include new variants of COVID-19 or other communicable diseases such as Ebola and an unexpected slowdown in Disney’s earnings.
Many economists and stock market analysts are predicting that the North American economy will fall into a recession in 2023, or at least a substantial slowdown. This would likely hurt Disney. After all, some cash-strapped consumers lack the discretionary income to go on costly trips, particularly as costs jump for essential items such as food, shelter, transportation and the likes.
The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in two segments: Disney Media and Entertainment, and Disney Parks, Experiences and Products.
Despite all of its sources of income, Disney continues to pay no dividends. Mr. Johnson writes, “Longer-term…dividends will remain a part of our capital allocation strategy, but we don’t expect the company to pay dividends any time soon.”
This is an edited version of an article that was originally published for subscribers in the December 2022/First Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.
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The MoneyLetter •4/25/23 •