Should you buy Disney shares in August after a solid Q3 performance?

On Friday, the Walt Disney Co (NYSE:DIS) stock price edged higher 2% after announcing its most recent quarterly results. The company reported its fiscal Q3 revenue and earnings Thursday after markets closed, beating analyst expectations.

Disney posted non-GAAP earnings per share of $0.80, beating the consensus Street estimate of $0.55. In addition, its GAAP EPS of $0.50 outperformed the expectations by $0.19, while revenue grew by 44.5% to $17.02 billion, beating estimates by $260 million. 

The company’s DisneyPlus subscribers also increased to 116 million, 3.5 million better than the average estimate of 112.5 million.

Disney CEO, Bob Chapek, said:

Why buy Disney shares now?

Although Disney’s performance has improved over the last few months, the stock price is yet to respond, leaving more room to run. 

The covid-19 situation continues to improve despite the threat of the delta variant. Therefore, it is unlikely that the worldwide lockdowns will return, meaning recreational parks and entertainment businesses will continue to recover. According to the company’s Q3 results, parks returned a profit for the first time since the pandemic, implying a promising future.

However, Bank of America (BofA) analysts warned that consumers are already beginning to reduce spending after a big splurge in the three months ending June.

In a note to investors, BofA economist Michelle Meyer wrote:

From a valuation perspective, Disney shares trade a forward P/E ratio of about 36.09. However, with analysts expecting earnings to fall by 125% this year before bouncing back 110% next year, it could be a bumpy ride in the short term. 

Nonetheless, growth investors could look at Disney’s forecast 5-year average annual EPS growth rate of 50.44% as an opportunity to buy long term.

Technical overview: DIS stock price forecast for August 2021

Technically, Disney shares appear to have recently spiked to trade above the 100-day moving average in the intraday chart. However, the stock is yet to reach overbought conditions in the 14-day RSI, leaving more room for an upward movement.

Therefore, investors can target profits at approximately $187.77 and $192.97. On the other hand, the support levels are $178.18 and $172.37. Shares traded at $182.78 as of this writing.

Bottom line: the case for buying DIS shares now

In summary, Disney shares appear to have recently spiked after a solid Q3 performance. However, the stock price is yet to reach overbought conditions leaving room for a continued uptrend. Therefore, it may not be too late to buy the DIS stock rebound.