How To Trade Disney Stock After Earnings

Shares of Disney (NYSE: DIS) are on track to cross the $200 mark for the first time in the next few sessions after reporting fiscal Q1 earnings last night that took Wall Street by surprise. GAAP EPS was firmly in the black at $0.02 after an impressive beat by $0.73 that helped stave off a loss marking quarter. Though revenue was down more than 20% on the year, it was still ahead of the consensus and not as bad as many feared.

Considering it was this time last year that parks were starting to be shut and movie releases were being postponed, a 20% drop in revenue year on year isn’t all that bad. Shares jumped immediately in after-hours trading as investors digested the report and numbers but they opened a little softly on Friday. They were likely pulled down by some general profit-taking in the market as the major indices took a breather from a multi-day winning streak.

Disney Plus

The jewel in Disney’s crown this past year and one that will continue to shine has been their Disney Plus on-demand streaming service. Subscriber numbers have been growing steadily and have helped make them a serious competitor to Netflix (NASDAQ: NFLX) in the streaming wars. Subscriber numbers for the quarter just ended were well ahead of what analysts were expecting, which no doubt helped to fuel the bid seen in shares.

Disney’s CEO, Bob Chapek, struck an ultra bullish tone with the report when he said “we believe the strategic actions we’re taking to transform our Company will fuel our growth and enhance shareholder value, as demonstrated by the incredible strides we’ve made in our DTC business, reaching more than 146 million total paid subscriptions across our streaming services at the end of the quarter. We’re confident that, with our robust pipeline of exceptional, high-quality content and the upcoming launch of our new Star-branded international general entertainment offering, we are well-positioned to achieve even greater success going forward.”

Bright Year Ahead

This is all good stuff and helps to justify the ongoing rally in Disney’s shares which has them up 140% since March and 50% since November alone. It’s important to remember that the company isn’t even firing on both cylinders, with their gigantic theme park revenue stream almost bone dry for much of the past year. Earlier this week a limited opening of their California Adventure Park was announced which bodes well for a continued reopening as more and more of the population receive their vaccines. There’s also an active bill in California Assembly that would see all theme parks in the state reopen once COVID cases hit the orange tier.

For investors still, on the sidelines, there’s a minimal downside to getting involved in Disney at these levels. It’s capital appreciation record speaks for itself, while a steady dividend also makes it appealing across the broader investor classes. Having come through the pandemic with flying colors, there’s every reason to think 2021 will be another banner year for Mickey Mouse and his friends. Their traditional core revenues are set to surge back to life in the coming months, and these will be supplemented by the fresh revenues that the pandemic helped to fuel.