Wednesday, 20 March 2024

Can Disney Stock Keep Hitting New 52-Week Highs?

by BD Banks

It’s been a Mickey Mouse March for Walt Disney (NYSE: DIS) investors. Shares of the media giant hit a 52-week high earlier this month. The stock closed on Monday within 1% of lifting that ceiling even higher. Why is Disney trouncing the market this year, up 26% in 2024 to more than triple the market’s 8% climb? More importantly, can the shares continue to move higher from here?

The road to here is fairly easy to explain. Disney as an investment has underperformed the general market for three consecutive years. Most losing streaks eventually catch a break. There’s also the win-win scenario of Disney’s proxy battle that will be resolved one way or another in two weeks at the company’s annual shareholder meeting. The real question that has to be on investors’ minds is what happens after the House of Mouse concludes its yearly meeting on April 3. You’re probably going to like the answer.

Go the distance

I have spent the past couple of months arguing that investors are the clear winners of Disney’s proxy battle. Disney has been pulling out all the stops to make sure it delivers a steady trickle of good news heading into the early April showdown with a pair of activist investor groups.

It’s not just announcing a 50% dividend hike in February, five months before the semiannual distribution will go out. It’s not just outbidding rival streaming services to get Taylor Swift’s record-breaking concert film on Disney+ last week. It announced on Monday that Wish — its most recent animated theatrical release — will hit its namesake streaming service on the same day of the annual shareholder meeting. Don’t dismiss this as a lucky coincidence. It’s Wish-ful thinking.

Disney has ammo, and it’s not afraid to use it. It’s pulling all the right levers to get viewers, theme park enthusiasts, and income investors on board. Good news tends to deliver good days on the trading floor. What comes next?

Let’s start with Wish. One can argue that it’s a risky move to make headlines for the film’s premium service release window. The film did not do well at the multiplex, ringing up just $64 million in domestic ticket sales. Put another way, just 2% of the U.S. saw the animated feature on the silver screen. It fared a lot better overseas, topping $190 million in box office receipts outside of the U.S. market — but it was a financial flop nonetheless.

Critics also largely panned the film, with just 48% of the film reviewers tracked by Rotten Tomatoes recommending the movie. Disney’s animated fare historically does a lot better than that. However, the audience approval rating — for those handful of ticket buyers — is a more encouraging 81%.

Don’t underestimate a Disney animated feature’s chances at becoming popular after falling short in its theatrical release. Encanto failed to top $100 million domestically when it was released in late 2021. It shot skyward in popularity after families streamed it over and over again when it hit Disney+.

Can Disney Stock Keep Hitting New 52-Week Highs?

Image source: Disney.

This wish

The fireworks won’t end after the annual shareholder meeting, which is shaping up to not be much of a battle. Proxy advisory firm Glass Lewis announced on Monday that it is siding with CEO Bob Iger and Disney’s board. This fight is essentially done.

The good news should keep coming beyond early April. Disney has at least one potential theatrical release blockbuster coming out every month from May to the end of December. They won’t all be winners, but anything will be better than last year’s poor run at the corner cinema. Iger hasn’t backed down from the goal that Disney+ and the rest of its streaming services will be profitable by the end of September. The move will not only silence a sharp criticism of Disney’s business, but also result in explosive bottom-line growth as a money pit sandbag becomes an Up balloon.

This has been a good start to the calendar year for the widely followed media stock. The best could be yet to come.

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Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.