One of my favorite memories with the family is a Disney cruise we took to celebrate my twins’ 10th birthday.
The experience was truly magical and years later I still love flipping through the pictures we took and talking to the girls about their favorite part of the trip.
Unfortunately, the coronavirus crisis kept many families from enjoying similar experiences — either on a cruise ship or at any one of Disney’s theme parks.
Thankfully vaccines are rolling out… The medical community is learning how to treat patients more effectively… And visitors are returning to Disney’s locations.
The company is returning to profitability. And the stock gives investors and traders a great opportunity to profit from pent up demand for experiences with loved ones.
Pent Up Demand and a Robust Business Model
Travel and leisure stocks make for a great reopening play.
And it’s not just because the economy is “getting back to normal.” Many travelers have an urge to make up for lost time. And that’s driving demand for vacations and more spending than we may have seen in a typical year before the coronavirus crisis.
Disney’s profits from its theme parks, cruise lines and other real estate plays should surge in the year ahead. And investors should start pushing the share price for Disney Co. (DIS) higher even before the actual profits are generated.
That’s because any comments from the management team on bookings will naturally lead to investor optimism. I’ll be listening for any information on Fall Break, the Christmas holiday season or next year’s spring and summer schedule.
And some of the biggest investors will be doing channel checks as well. This means checking in with trip planners, watching room prices and vacancy levels, and more. These data points can help institutional investors anticipate profit growth before the news is out.
Meanwhile, Disney has adjusted its business to become more robust.
Revenues from its digital assets continue to grow — including profits from Disney+ (a popular streaming service our family loves), its ESPN sports network and more.
So even while the pandemic shuttered the more traditional part of Disney’s business, the company was growing other areas to offset the weakness.
Disney’s net income dropped off sharply when the coronavirus hit. But already we’re seeing profits rebound as the economy starts to reopen.
After a Sideways Summer, DIS is Ready to Ramp!
Shares of DIS rocketed higher between November 2021 and February of this year. Emergency approval of vaccines and a declining case count gave investors plenty of optimism.
But over the summer, shares of DIS have moved sideways.
Perhaps investors are wary of the delta variant and potential travel restrictions. Or maybe the stock is just consolidating after such a strong run.
After finding support at the 200-day average (blue line on the chart above), the stock is starting to move higher. A break above previous highs could ignite investor excitement and lead to another profitable surge.
Today’s market features a large number of retail investors with unprecedented access to market information. And U.S. households are flush with cash thanks to generous stimulus payments.
That cash could propel DIS higher through advance trip bookings as well as through widespread purchases of this well known reopening stock.
I’m expecting shares of DIS to move higher off this support level. And if you invest today, you could bag profits to help you book your own cruise!
If you find yourself on one of the cruise ships, I highly recommend the ice cream sundae!