Disney’s Impressive Surge Could Propel Stock to Record Heights

(Disclaimer: The author of this analysis is a financial writer and portfolio manager who holds shares of DIS.)

The Walt Disney Company (DIS) is emerging from a three-year consolidation phase, signaling a potential surge of approximately 7% to reclaim its former peak near $122 from its current level around $114. Over the last three years, Disney’s shares have underperformed, declining nearly 4%, while the S&P 500 soared by almost 36%.

This upward momentum follows news that Comcast Corporation (CMCSA) has withdrawn from the competitive bidding for Twenty-First Century Fox Inc. (FOX) assets. This development positions Disney as the clear frontrunner, fueling investor optimism about the vast growth opportunities for Disney's streaming platform, scheduled to launch in 2019. Since early May, Disney’s shares have climbed over 15%, rising from about $98, buoyed by expectations of robust earnings growth and the strategic acquisition of Fox’s assets.

Significant Breakout on the Horizon

After trading within a tight range for nearly three years following its peak at $122 on August 4, 2015, Disney’s stock formed a symmetrical triangle pattern—a bullish technical formation indicating a continuation of upward momentum. The recent breakout above the long-term downtrend suggests the stock is primed to revisit its all-time highs, potentially gaining around 7%. This rally is supported by increasing trading volumes, signaling heightened investor interest.

Turning the Tide Against Market Trends

While Disney lagged behind the S&P 500 for much of 2018, the exit of Comcast from the Fox bidding war has shifted momentum. Disney’s stock has surged over 6%, outperforming the S&P 500’s approximate 5% gain this year. Meanwhile, Comcast’s shares have declined by more than 12%, underscoring Disney’s strengthened market position.

Robust Growth Prospects at an Attractive Valuation

The integration of Fox’s assets is expected to enhance Disney’s already promising earnings outlook. Analysts forecast a 25% earnings increase in 2018, tapering to 8% growth in 2019, with revenues projected to rise 7% and 4% respectively. These estimates are likely to improve with the new acquisitions.

Source: YCharts

Currently, Disney’s stock trades at a forward price-to-earnings ratio of just 15 times 2019 earnings estimates, placing it at the lower end of its four-year historical range, making it an appealing investment opportunity.

The Fox acquisition could serve as a significant catalyst, especially if it accelerates the success of Disney’s upcoming streaming service, potentially driving the stock much higher over the long term.

Michael Kramer is the founder of Mott Capital Management LLC, a registered investment advisor, and manager of the Thematic Growth Portfolio. He typically holds stocks for three to five years. For more information on Kramer’s background and portfolio holdings, please visit his bio. This content is for educational purposes only and does not constitute an offer or solicitation for any securities or investment strategies. Investing involves risks, and past performance is not indicative of future results. Consult a qualified financial advisor or tax professional before making investment decisions. Upon request, a list of all recommendations made in the past twelve months will be provided.

For news tips, please contact Investopedia reporters at tips@investopedia.com.

Explore useful articles in Markets News as of 24-07-2018. The article titled " Disney’s Impressive Surge Could Propel Stock to Record Heights " offers in-depth analysis and practical advice in the Markets News field. Each article is carefully crafted by experts to provide maximum value to readers.

The " Disney’s Impressive Surge Could Propel Stock to Record Heights " article expands your knowledge in Markets News, keeps you informed about the latest developments, and helps you make well-informed decisions. Each article is based on unique content, ensuring originality and quality.