The Walt Disney Company (DIS, Financial) has exhibited commendable financial and market performance in the recent past and the company intends to continue the same trend by strengthening its overall business. Disney intends to introduce a new set of tools called My Disney to enhance customers’ Disney experience. The company also introduced a new gaming platform for its virtual game that will include characters from Disney movies.
The entertainment giant has earned the confidence of both investors and analysts. Disney has received a "buy" rating from multiple analysts, including those at Deutsche Bank and TheStreet. Deutsche Bank raised Disney’s target price to $56 and commented, “After reviewing trends our F1QE EPS of $0.77 remains unchanged (Street $0.77), and we believe Disney will report in line-to-ahead with ESPN ad sales improving later in F1Q, Park trends seemingly remaining healthy, Wreck It Ralph doing well internationally, and in particular given MGMT's early Dec positive commentary around F1Q (better ESPN ad revenue) when typically negative datapoints would be offered if the Street was too high. Perhaps more importantly, investors will turn from the challenged F1Q13 to healthy CY13 growth.”
The following chart represents the trend of Disney’s share price over the past year.
It can be clearly observed from the chart that the market performance of the company has been highly impressive over the past year. Disney’s stock is up 40.80% from the past year, and there is sufficient level of certainty that the trend will continue in the same direction. Currently, the shares of the company are being traded within the range of $52.10 and $52.33, which is very close to the higher end of the company’s 52-week range of share price, i.e. $38.38 and $53.40.
Disney’s Financial Performance
Disney’s earnings per share have improved by 17.2% in the most recent quarter as compared to the same quarter last year. The trend in the growth of earnings per share has been moving upwards for the past two years, and it is expected that Disney will continue to increase its earnings per share in the prospective financial periods. In the past year, Disney disclosed earnings of $3.12 per share as compared to $2.52 in the prior year. The expectation in the market regarding the EPS for the current year is $3.41. The financial strength of the company can also be observed from its return on equity. Currently, Disney’s return on equity stands at 14.3%, which is higher than the industry average.
Disney’s New Projects
The Walt Disney Company recently announced that it is introducing a new set of tools called MyMagic+ that will enhance the overall customer experience. The set of tools will include: a website, a smartphone app, and magic wristbands that will be worn throughout the park. The wristbands will contain the ID number of the guest, which is linked to additional information concerning the guests. This way, the staff at the park will already know the names of the guests and whether it is any guest’s birthday.
Guests will also be able to customize their overall park experience before being physically present. This way, guests will be able to skip the lines in front of their favorite rides. This improved customer experience is expected to increase the customer turnaround at the parks, therefore resulting in higher revenue.
Disney also introduced Disney Infinity which is a gaming platform that allows the gamers to personally experience the roles of the characters from Disney movies. The gaming platform will come bundled with actual figurines that will be docked into a portal from where they will be transported to the virtual realms. This gaming platform is expected to give a serious push to Disney’s gaming business.
After the analysis of Disney’s strong market performance, financial performance, and factors that may potentially enhance the company’s performance in prospective periods, in my opinion, investors should buy the shares in the company. The rationalization behind this recommendation is that all the trends suggest that Disney will continue to perform strongly in the foreseeable future and this strong financial performance will have a positive influence on its market performance. Therefore, both short-term and long-term investors would benefit from buying the shares at this point.
The entertainment giant has earned the confidence of both investors and analysts. Disney has received a "buy" rating from multiple analysts, including those at Deutsche Bank and TheStreet. Deutsche Bank raised Disney’s target price to $56 and commented, “After reviewing trends our F1QE EPS of $0.77 remains unchanged (Street $0.77), and we believe Disney will report in line-to-ahead with ESPN ad sales improving later in F1Q, Park trends seemingly remaining healthy, Wreck It Ralph doing well internationally, and in particular given MGMT's early Dec positive commentary around F1Q (better ESPN ad revenue) when typically negative datapoints would be offered if the Street was too high. Perhaps more importantly, investors will turn from the challenged F1Q13 to healthy CY13 growth.”
The following chart represents the trend of Disney’s share price over the past year.
It can be clearly observed from the chart that the market performance of the company has been highly impressive over the past year. Disney’s stock is up 40.80% from the past year, and there is sufficient level of certainty that the trend will continue in the same direction. Currently, the shares of the company are being traded within the range of $52.10 and $52.33, which is very close to the higher end of the company’s 52-week range of share price, i.e. $38.38 and $53.40.
Disney’s Financial Performance
Disney’s earnings per share have improved by 17.2% in the most recent quarter as compared to the same quarter last year. The trend in the growth of earnings per share has been moving upwards for the past two years, and it is expected that Disney will continue to increase its earnings per share in the prospective financial periods. In the past year, Disney disclosed earnings of $3.12 per share as compared to $2.52 in the prior year. The expectation in the market regarding the EPS for the current year is $3.41. The financial strength of the company can also be observed from its return on equity. Currently, Disney’s return on equity stands at 14.3%, which is higher than the industry average.
Disney’s New Projects
The Walt Disney Company recently announced that it is introducing a new set of tools called MyMagic+ that will enhance the overall customer experience. The set of tools will include: a website, a smartphone app, and magic wristbands that will be worn throughout the park. The wristbands will contain the ID number of the guest, which is linked to additional information concerning the guests. This way, the staff at the park will already know the names of the guests and whether it is any guest’s birthday.
Guests will also be able to customize their overall park experience before being physically present. This way, guests will be able to skip the lines in front of their favorite rides. This improved customer experience is expected to increase the customer turnaround at the parks, therefore resulting in higher revenue.
Disney also introduced Disney Infinity which is a gaming platform that allows the gamers to personally experience the roles of the characters from Disney movies. The gaming platform will come bundled with actual figurines that will be docked into a portal from where they will be transported to the virtual realms. This gaming platform is expected to give a serious push to Disney’s gaming business.
After the analysis of Disney’s strong market performance, financial performance, and factors that may potentially enhance the company’s performance in prospective periods, in my opinion, investors should buy the shares in the company. The rationalization behind this recommendation is that all the trends suggest that Disney will continue to perform strongly in the foreseeable future and this strong financial performance will have a positive influence on its market performance. Therefore, both short-term and long-term investors would benefit from buying the shares at this point.
