This is a special look at one of the picks in Ed Ponsi's Reopening Portfolio appearing today on Real Money. See the full list of his picks and watch Ed and his fellow Real Money columnists Chris Versace and Stephen “Sarge” Guilfoyle debate their choices on May 26 in a special Real Money webinar, Real Talk. Sign up now!
Most of us are ready for a vacation. That vacation is likely to take place within the U.S., as a large percentage of the population is already vaccinated.
Currently, nearly 50% of the U.S. population has received at least one shot, and over 35% of U.S. citizens are fully vaccinated. Those numbers should get a boost, now that the Pfizer (PFE) - Get Pfizer Inc. Report vaccine has been authorized for adolescents aged 12 and older on an emergency basis.
Combine that with the fact that the pandemic has been especially hard on kids, some of whom have been isolated from their friends and classmates for nearly a year. If you’re bored with Zoom meetings, try to imagine how a ten-year-old must feel about them.
Disney should see huge demand for its theme parks and cruises. Like Starbucks (SBUX) - Get Starbucks Corporation Report and Lululemon Athletica (LULU) - Get Lululemon Athletica Inc (LULU) Report, Disney is one of a handful of companies that inspires fierce loyalty among its customers. The House of Mouse does this by providing a one-of-a-kind experience.
For some folks, a Disney cruise or theme park excursion is an annual ritual. That ritual has been interrupted, and now pandemic-weary consumers are chomping at the bit. They are ready to make new memories, and Disney will be one of the top destinations on their wish list.
Disney has also scored a major success with its Disney+ streaming service, which now has over 100 million global subscribers. The service has had several recent hits with The Mandalorian and WandaVision, and plans to introduce additional original programming based on its Star Wars and Marvel franchises.
What about Disney’s chart? After a 31% gain in 2020, this stock is little changed year-to-date. That’s not necessarily a bad thing; since mid-January, Disney has been consolidating last year’s gains.
Think of this price action as similar to digesting a large meal. It’s not unusual for a stock to have a great run, and then pause for a time before resuming its ascent. That’s what Disney is doing now.
Disney’s consolidation has taken the form of a symmetrical triangle (black lines). This type of pattern tends to resolve in the direction of the previous trend. In this case, that’s good news, since the previous trend for Disney was bullish.
Note also that Disney is consolidating on low volume (shaded yellow). That shouldn’t concern investors; in fact, it’s typical behavior during a consolidation of this type.
What’s the worst-case scenario for Disney? Take a look at the stock’s 200-day moving average (red line). Disney hasn’t closed beneath its 200-day moving average in six months. As long as the stock remains above that key indicator, I’d hold it.
Based on the chart’s prior trend and consolidation pattern, my price target for Disney is $215. Barring any major market disruption, Disney should get there.
Ed Ponsi is a regular contributor to Real Money Pro, TheStreet’s sister site for active traders. Click here to learn more and get great columns, commentary and trade ideas from Tim Collins, Mark Sebastian, Paul Price, Doug Kass and others.
Disclosure: At the time of publication of this article, Ponsi held a long position in Disney.