When Walt Disney first brought his drawings of a little mouse to movie life, the entertainment industry changed forever.
The Walt Disney Co.(DIS) - Get Report has been a hit machine for nearly a century. And while film studio profits remain a key element of this $150-billion juggernaut, Disney also gets considerable streams of revenue from its theme parks and other branding.
To be sure, Disney stock has been having a rough year, down 10.11%.
But this presents an excellent opportunity to get in right away at a bargain-basement price. You could be seeing gains of 20% within a year, not to mention healthy dividends.
Interested? Here are the top five reasons why Disney is an excellent play right now.
1. Size Does Matter
Disney is one of the world's foremost diversified entertainment companies.
It competes with players like 21st Century Fox, Time Warner, and Comcast, among others.
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Its empire is spread across Media Networks (cable TV, radio stations, ESPN, ABC Family), Parks and Resorts, Studio Entertainment (Walt Disney Pictures, Pixar, Marvel, Touchstone, Disney Music Group, etc.), and Consumer Products & Interactive divisions (merchandise, games).
Clearly, Disney's reach is immense and multifaceted. It would take some really terrible decisions to bludgeon a company this big, given its entertainment stronghold.
2. Top-Notch Products
Disney offers a fabulous earnings growth opportunity at a reasonable price.
Analysts expect Disney to clock 10.74% annual earnings per share (EPS) growth for the next five years.
Driving the movement will be many factors: movie profits, video streaming, and theme parks.
Each of these businesses is a slice of the larger pie, and in each, Disney has firm roots.
Disney's movie brands, for instance, are eye-catching: superhero-focused Marvel, animation major Pixar, and Star Wars creator Lucasfilm. Its parks and resorts located in the U.S. as well as Tokyo, Shanghai, Hong Kong, Paris, etc., are also hugely complementary.
3. An Upcoming Streaming Service
To this already impressive repertoire add new innovations at Disney as the company transforms itself into a digital streamer.
The company's $1 billion bet on BAMTech (spun off from MLB Advanced Media) is part of its plans to counter the cord-slimming phenomenon.
Unless you've been living under a rock, by now you know that digital video subscription-based streaming services offered by the likes of Netflix and Amazon.com are a big threat to cable companies.
Disney will emerge as a strong digital media entity in the days to come, thanks to its smart collaborative approach. And Disney has tons of content ready to be monetized via digital platforms. ESPN-branded subscription-based video streaming services can also broaden Disney's net from Sony's PlayStation VUE and Apple TV avenues.
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4. Magical Metrics
Admittedly, several of Disney's peers are offering an improved earnings outlook at present. That's where we believe an opportunity presents itself.
Disney's financial strength and massive scale, along with multiple investments in new areas, can only mean great things ahead.
The company carries manageable debt levels and good, levered free-cash-flow generation and is largely profitable. Few of its peers can boast of so much, combined with a rich operating history. At a forward price-to-earnings (P/E) ratio of 15.51 times, Disney shares are also cheap.
5: Fantastic Future Upsides
Analysts believe Disney's stock can touch $113 a share over the next 12 months, a nearly 20% upside from current levels. The upside in rival Time Warner's stock is only 12%. For Viacom, the upside is limited to about 6%.
Along with room for stock price appreciation, Disney is also a stable income generator, with five years of rising dividends.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.