Is Disney A Profitable Stock?

by Guest on December 8, 2015

The stock of Disney has been remarkably strong over the long term, with the House of Mouse being up by more than 190% over the last 5 years. Although Disney stock has shown a pullback of over 150% since record highs reached in 2015, the weak market, as well as disappointing earnings, has meant that Disney has been down in the last quarter. Despite this, if investors seek a solid business to trade as an asset, then they should typically trade Disney stock, especially if they are long term investors. This also means that companies like Disney are an ideal investment for binary options traders right now.

A Rock Solid Business

One of Walt Disney Company’s most important and profitable assets is ESPN. For this reason, any decline in viewer subscriptions is a disaster for Disney. However, all current indications point toward ESPN being in a good position to adapt regardless of the current revolution featuring cord-cutting in the company. The ESPN network is unparalleled in terms of providing live sport and updates. According to market research, ESPN commanded about 83% of the sports-related television viewing in the US in 2015. In addition, the station has a mammoth 96% share of all live sports broadcasting which gives it a large advantage when it comes to advertising revenue.

Disney’s Related Businesses

Besides ESPN, the other businesses owned by Disney are also in fine health. For example, Disney’s studio contributed greatly to the company’s overall business by providing an increase of 15% in operating income in the last quarter of 2014. This was largely thanks to the box office success of the Avengers: Age of Ultron, Inside Out and Cinderella.

In addition to this, there has been a rise in the company’s incomes from the leisure park business, with operating income in the US being up by 9 percent in the same period. Another area where the company has shown strong signs of growth is the income resulting from merchandising; Disney’s consumer products division showed an increase in profitability of 27%, thanks to Star Wars, Frozen and Avengers merchandise sales.

The Force Awakens

Although Disney’s fundamentals are strong, there might still be more good news to come for investors and Option.FM traders. This is because Disney is poised to launch the latest installment in the Star Wars franchise, The Force Awakens. It goes without saying that this movie is bound to be one of the major blockbusters during the festive season, and should be a major driver for sales for Disney’s studio. Disney studio’s management has confirmed that, in addition to The Force Awakens movie, they are also planning to release additional movies that will ride on the reception of the Star Wars movie. For this reason, Star Wars takes on much more importance than any single movie released by Disney.

Expansion into China

In addition to its American theme parks and movie business, Disney plans to launch a theme park within Shanghai, in mainland China in 2016. What is important for traders to note is that this will be one of the biggest projects ever undertaken by Disney. The China project will feature six different themed resorts, a shopping district, two hotels and an entertainment center. Investors should be excited about this development because the Disney brand is extremely popular in Asia and also, this could be a gateway to the large Chinese market.

Average Valuation

One of the properties of Disney stock to financial traders is that it trades at a level that is substantially above the market price for similar companies. However, when you consider the quality of the company, the record of success it has had and the potential it has over the medium and long term, the high stock price is understandable.

At DIS current price of $114.87, Disney is trading at 21 times of its earnings compared to the last financial year. This means that investors can expect that Disney will return a moderate premium with regard to the S&P 500 index (SPX). In addition, Disney will return a P/E ratio of about 19. For investors who have a long term focus, Disney has a P/E ratio of 18 times the earnings forecast with regard to the S&P 500 index. For binary options traders, the Disney stock is an extremely good trade option on the Option.FM trading platform because it is evident that it is a large company with strong fundamentals and which has excellent long term prospects.

The Power of Content

Although many of the world’s most creative talent are employed by Disney, the company keeps looking to acquire other creative centers in order to expand its content base. Not only is Disney buying up new creatives, it is also seeking to milk the maximum value from its acquisitions. A good example is Marvel: the company managed to release two blockbusters that made more than $1 billion – Iron Man 3 and the Avengers. In addition, Disney has managed to adapt the content to television by producing such shows as agents of S.H.I.E.L.D and original content for Netflix. Investors can expect to see the same with the Lucasfilm’s Star Wars franchise.

Strong Financials

Year on year, the Disney machine rolls on. Within the fourth quarter of the 2014 fiscal year, Disney’s revenues rose to $11.6 billion, a 7% increase, while earnings increased to $1.39 billion, which was a 12% increase. Across all the company’s divisions, there was a strong showing, with even the price-to-earnings ratio of 16.8 being a reasonable evaluation.

Disney Stays Ahead Of Technology

A key feature of Disney’s operations is its drive to stay ahead of the competition. One example of this is the company’s recent move to appoint Jack Dorsey, one of the founders of Twitter, to sit on its board. However, technology has a dark side, as was evident with the threat of content sharing for the music industry. Despite this, Disney has taken advantage of the lower cost of storing data online to make its films available to internet users.

The Final Word

The CEO of Disney, Robert Iger, has had a tremendous impact on the success of the company. The savvy acquisitions he has made, along with the move to invest in consumer goods and media assets has meant that Disney is one of the most stable assets that investors and binary options traders can invest in.

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{ 1 comment… read it below or add one }

Brian Robben December 16, 2015 at 11:35 am

Buffett made the mistake of selling Disney too early and lost around $12 billion on it. Anyway, it’s hard for me to tell if well-known and reported on companies like Disney are wise investments or is it better to find stocks that are less watched and less valued.

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