Forget the ISA or Pension Fund! I’d Suggest Getting Disney Shares

on Mar 7, 2020
Updated: Apr 3, 2020
  • Disney share price is down for a number of factors.
  • Most of the issues appear to be of a short-term nature.
  • Disney+ looks like it will be a success this year.

When the stock market takes a hammering like just now, there are bargains to be had. Right now, it looks like Disney shares could be a smart purchase.

The Current Situation

At the time of writing, Disney (NYSE: DIS) is sitting at $115.27. It has recovered slightly in recent days, but still has some way to go to get back to past numbers. As recently as mid-February, this stock was at over $140. At the start of December 2019, the price was over $150.

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We have to go back a full year to see the price as low as it is now. Let’s see what has caused this drop in value and how long it could last for.

The Current Factors

There is no doubt that coronavirus is the biggest factor at play here. The outbreak in China has caused the company to close its theme parks there. They are losing money every day that the parks are closed. If they need to close their American parks too then things will get even more serious.

Yet, this is simply a temporary measure. No one expects these parks to stay closed forever. Indeed, recent reports suggest that new cases in Wuhan should drop to zero by the end of March thanks to successful containment measures in the city.

Some businesses could take longer than others to react positively to the end of this scare when it eventually arrives. Going to a Disney park might not be the first thing on people’s minds. But sooner or later visitors will start coming back to them.

Remember that this a hugely diversified business too. Their parks and resorts earned over $20 billion in 2018, putting this sector second behind their media networks ($24.5 billion) in terms of earning power.

Another possible issue is the recent announcement of the stepping down of CEO Bob Iger. After 20 years at the helm, Iger decided that he wanted to concentrate on more creative issues.  This change made the market nervous, but Bob Chapek has already agreed to take over. Chapek was previously the chairman of Disney parks.

Is Disney+ Going to Be a Success?

One of the most powerful reasons for buying Disney stock now is their streaming service called Disney+. It was launched in November 2019 and quickly racked up close to 30 million subscribers, mainly in North America.

March 2020 will see this service launched in parts of Europe and in India. Details of the UK launch have just been revealed, with The Simpsons, the first 8 Stars Wars films, more than 500 movies and 26 exclusive Disney + originals available to subscribers from March 24.

If this streaming service takes off in major markets like the UK, India and Germany, it will give the share price a welcome boost.

Summary

The Disney brand has been around for decades and is unlikely to go away soon. The issues that have caused the price to fall recently all appear to be temporary. The strength of the brand and the early success of Disney+ should help the price to recover before too long.

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