Disney Remains a Common Sense Investment

Disney (NYSE:DIS) will report earnings for its fiscal third quarter when the market closes on August 4. And if you put stock in things like the whisper number, it could be a dismal report for Disney. The earnings whisper number is hinting the House of Mouse will report negative earnings per share of 75 cents. The consensus is for negative earnings per share of 43 cents on revenue of $15.9 billion

The key for investors will be to see if Disney provides forward guidance. Because the ultimate question for Disney investors is not if Disney will survive, but when it will start being the company that was firing on all cylinders at the end of 2019.

Disney stock has climbed over 35% since selling off in March. At that time many people had the shovels out, and I said to buy the stock on sale. I hope you did. Now I might wait for the stock to take a little dip before dipping in again.

That doesn’t mean I dislike Disney stock, quite the contrary. But the stock was finding resistance at its current level until 2019 when the stock blew up along with the rest of the market. And to say that it’s hard to even remember what life was like one year ago would be an understatement.

There are green shoots

Airline stocks are rising as of this writing on news that more people are flying. In fact, I heard on Fox Business that 750,000 passengers went through terminals on August 3. Now I’m not going to pretend that’s a sign that happy days are here again. They’re not.

But that isn’t an insignificant number either, particularly when you consider that Orlando’s airport was seeing rising passenger traffic before Disney World re-opened.

Is the experience normal? Certainly not. Park traffic is restricted, many traditional attractions are temporarily closed and Disney is backing off on prior construction plans. But most (if not all) of that was priced into the stock when it started to rally before reopening.

However, a Disney theme park operating at just a fraction of its former revenue is still better than a theme park that’s not open at all. Safety will be the primary issue as theme parks reopen. I have to presume the company is passing the test because you would be hearing about it if Disney was linked to a Covid-19 outbreak.

The whole of Disney is greater than the parts

Some investors would make the argument that none of Disney’s parts are functioning well. And it’s true that the explosive growth in Disney+, the company’s streaming service will probably show that it’s leveling off. The return of live sports will help ESPN, but there is no question that the company needs a content plan.

All of which is to say that Disney stock may be priced for a perfection that is not possible in these difficult times. However, in the long run it’s hard to make a case that Disney won’t be back. It may just take some time.

Disney is a polarizing stock

There’s no question that Disney is a polarizing stock. I sometimes have a hard time understanding why. But then again, I’m trying to sit out the culture war. It makes people happy. And that makes some people mad, I guess.

The bulls say that a positive Disney experience is like death and taxes. The bears are saying that Disney was irresponsible for opening and may even be a racist company.

You can listen to either or both arguments to decide on whether to take a trip to one of the company’s theme parks. But I’d caution you to not use either argument as a reason to buy or sell DIS stock.

Disney is still a destination. And for many “regulars” it’s an essential destination with or without a face covering. Park-goers are already commenting on how “magically” Disney is balancing safety measures with the Disney experience.

Disney thrives on creativity, and I suspect it also likes being counted out. Is Disney a buy at its current price? Probably not, in fact there may be an opportunity to buy the stock on a dip. But remember that investing in Disney stock doesn’t require you to be a true believer, just to exercise common sense