Even through the worst pandemic, Disney (NYSE: DIS) they never lost his magic. Yes, the entertainment giant closed its theme parks for a while and swam to an annual loss, but investors never stopped believing in Disney’s future. The stock climbed 25% last year and is up more than 7% so far this year.
Those who were bullish on Disney were right. But it is never too late to pick up excerpts from this popular name. (Disney-themed parks make up the four most visited in the world, according to Statista.) Here are three reasons why Disney shares are a purchase.
Image source: Disney.
1. The magic returns to California
The company recently announced that Disneyland and Disney’s California Adventure will open on April 30th. The parks have been closed for more than a year due to the pandemic. Initially, they will only be open at 15% capacity, Disney CEO Bob Chapek told CNBC. But this is an important first step in getting income back on track.
The parks, experiences, and product division typically contribute significantly to Disney sales. In 2019, the sector accounted for nearly 40% of annual revenues. The company also generates sales from its movies, streaming services, and cable networks. Disney opened its theme parks in Florida last July.
Those parks and Shanghai Disney were open in the most recent quarter. The parks in Paris and Hong Kong were open for parts of their quarter. Disney said sales were even higher than the opening cost everywhere. So it is reasonable to expect the same in California.
A pent-up request for guests could come to California parks this spring. A decline in coronavirus cases and an increase in vaccines could encourage Disney fans to return.
2. popular Disney +
Last month, my colleague Danny Vena wrote about how Disney + streaming service could be a step ahead of Netflix by 2026. Digital TV Research predicted that Disney subscribers will reach 294 million to complete before that time. That compares to an estimate of 286 million for Netflix.
I agree that Disney + is on track to meet or beat Netflix. Disney + has recently reached over 100 million global subscribers – that’s just 16 months of work. Chapek recently called the direct-to-consumer business – which includes Disney + – the company’s “top priority”. He also said the company aims to launch more than 100 new titles each year across the streaming service.
In the most recent quarter, the direct-to-consumer business posted a 73% increase in revenue year-over-year. Investment to expand Disney + has gained weight, however. The department reported an operating loss of $ 466 million in the quarter.
However, that was down from a loss of $ 1.1 billion a year earlier. I expect big investment now to bring huge profits down the road for this sector.
3. Focus on e-commerce
Disney recently said it will close at least 60 corporate stores in North America this year – and shift its focus to e-commerce. This is a positive trend considering the growth in online shopping.
The online epidemic led to a sharp rise in online shopping last year. Even as the crisis worsens, consumers may still favor this method of purchasing essentials and optional items. The McKinsey & Co. research. showing that consumers expect to continue shopping on the internet after a pandemic. Online shopping rose 21.9% last year and could rise between 18% and 23% this year, according to the National Retail Federation.
Disney will benefit by meeting fans where they are more likely to buy now and in the years to come – in the comfort of their own homes.
Investors need to be patient to see the results of these three efforts in Disney earnings reports. It is going to take time to restore revenue and profit levels. But Disney has the tools it needs to get there. And that’s why right now is the time to invest in Disney’s future success.
This article represents the opinion of the writer, who may not agree with the “official” recommendation position of the Motley Fool chief consulting service. We are motley! Questioning an investment dissertation – even one of our own – helps us to think critically about investing and make decisions that will help us become softer, happier and richer.