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Walt Disney’s (NYSE: DIS ) cheap entertainment could be making a comeback

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After absorbing the severe market shock of the COVID-19 crisis, Walt DisneyNYSE: DIS) continue to deliver spectacular gains. At its peak, DIS stock broke through the $200 level, marking an all-time high for the company. Fundamentally, Disney offered cheap family entertainment and thus commanded a premium during shelter-in-place. While that narrative took a hit after the easing of COVID policies, economic pressures have made the entertainment giant important again. I am bullish on DIS.

Launched in November 2019, Disney’s streaming service, Disney+, has already garnered a lot of attention. Not only does it offer meaningful competition in the streaming space, Magic Kingdom also offers an unrivaled content library.go through capitalize on its vast franchise, Disney can take on the giants of the burgeoning streaming market. In fact, management is doing just that by launching a Star Wars-themed “The Mandalorian.”

DIS stock wasn’t immune to volatility when the COVID-19 crisis first hit the U.S. economy hard. However, when investors took a breather from the downturn in spring 2020, they realized that certain companies were cynically benefiting from the pandemic. Essentially, Disney now has a loyal audience, especially with the cancellation of live sports at the time.

as wall street journal That’s bad news for cable providers, noted. However, DIS stock benefits because the target company can still distribute already-produced content from its sprawling media empire.

Unfortunately for Disney, consumers are rushing out of their homes as fears of COVID-19 recede. After all, Americans have collectively suffered from cabin sickness for about two years. Soon, a new term appeared in the pop culture lexicon: revenge travel Or the desire to seek experiences that the pandemic has denied.

Perhaps not coincidentally, DIS stock has lost more than 36% year-to-date. Over the past month, however, shares are down just 1%, which may indicate a shift in sentiment.

Entertainment returns to DIS stock

In theory, the latest data on employment could bode well for a revenge trip that could hurt DIS stock. Overall, however, the environment favors cheap home entertainment platforms, making Disney an interesting contrarian opportunity.

To be fair, as prompt level Reporter Kailas Salunkhe mentioned that the November jobs report is out hotter than expected. The U.S. economy added 263,000 jobs, well ahead of Wall Street expectations for 200,000 jobs. However, it’s the details that make the difference.

According to Per Salunkhe, “jobs in leisure and hospitality, healthcare and government have increased significantly. On the other hand, sectors such as retail trade, transportation and housing have seen declines.” Furthermore, “large and small businesses have been laying off workers, while mid-sized firms Seems to be doing better during that time.”

In other words, many High-paying, white-collar corporate jobs sufferFilling the void are lower paying occupations, such as those in retail. Fundamentally, this development could help DIS stock at the expense of companies that benefit from retaliatory travel. Interestingly, the US Global Jets ETF (NYSE: JETS) fell nearly 14% for the year.

As a result, collective discretionary dollars for big-ticket items or experiences will likely be significantly reduced. Adding to this speculation, the personal savings rate surged to a record high in April 2020, but fell to a near-record low as of the latest data (October 2022).

Frankly, not many people have enough money to go on vacation in an exotic location. However, most people should have the money to spend a few bucks a month on high-quality streaming entertainment. Likewise, combined with Disney’s big franchises, the company can offer escapism at a very attractive price during difficult times.

Is DIS stock a sell or a buy?

Turning to Wall Street, DIS stock has a Strong Buy consensus rating based on 17 Buys, 4 Holds, and zero Sells assigned over the past three months. DIS has an average price target of $121.35, implying an upside potential of 29.84%.

Quantitative Data Supports Disney’s Contrarian Case

To be fair, DIS stock could use some work on the financial part of its investment recommendation. Still, investors have some positive traits to work with. The company continues to deliver decent income statement metrics. For example, Disney’s three-year revenue growth rate (on a per-share basis) of 2.7% actually ranks better than nearly 63% of its competitors. Moreover, its net profit margin of 8.2% is higher than that of nearly 64% of listed companies in the diversified media industry.

Honestly, these are not very positive stats. However, they may be more than enough for DIS stock due to fundamental catalysts favoring Magic Kingdom.

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