Stock Pick: Walt Disney

Walt Disney Company (DIS) is one of the most popular mass media and entertainment companies in the world. The conglomerate stands as an entertainment empire that operates in three business segments: feature film, TV, and theme park. Currently, Walt Disney has a labor force of 195,000 across 45 countries. In 2017, the company generated revenues of $55.1 billion.

Technical Analysis of Walt Disney (DIS)

Walt Disney posted its all-time high of $122.08 in August 2015. From that point, the stock entered a multi-year consolidation period. It pulled back to as low as $86.25 in February 2016 before generating a bullish pin bar on the monthly chart, suggesting that a short-term bottom was in place. This attracted bottom fishers and bargain hunters who helped push the stock to $116.10 in April 2017.

Unfortunately for buyers at this level, $116.10 was a lower high. This was a clue that DIS was still consolidating. It could also have been a sign that bulls have lost their momentum. Before panic ensued, however, DIS generated a higher low of $96.20. This dispelled the notion that DIS was ready to end its uptrend. More importantly, it emboldened more investors to place buy orders.

Technical analysis shows that DIS has taken out resistance of $110 in July 2018. This triggered the break out from the symmetrical triangle pattern. The price action marks the end of the three-year consolidation and the resumption of the uptrend.

On top of that, DIS has only one more resistance left to face: its all-time high of $122. Take that out and its all blue skies for the stock.

Fundamental Analysis of Walt Disney (DIS)

In addition, we have fundamental analysis to back our bullish view. The trailing twelve-month price to earnings ratio of DIS is 14.68. The stock is significantly undervalued considering that it has a five-year maximum of 25.30. This tells us that the stock is currently trading at a discount and it is likely a good buy at this level.

In addition, Walt Disney is set to acquire 21st Century Fox for $71.3 billion dollars after it received shareholder approval in July. While the merger was scheduled to go through early next year, recent reports suggest that the deal could be completed within the year. If the merger pushes through, DIS can become a strong long-term play. The purchase of Fox’s assets enables the media giant to grow its content vault and launch its own streaming service by next year.

The strategy is to buy on dips as close to $114 as possible. There’s a lot of excitement surrounding the stock even in the midst of general market volatility. As long as DIS stays above this level, it is set to take out its all-time high of $122 and rally to our target of $140.

The timeline for the target is more than six months.

Weekly DIS Chart

Monthly DIS Chart

As of this writing, the Walt Disney stock (DIS) is trading at $118.27.

Summary of Strategy

Buy: On dips as close to $114 support as possible.

Target: $140

Stop: Close below $110.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.