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Jim Cramer Eyeing Walt Disney as Stock Opportunities Emerge
During a recent October Monthly Meeting held by the Investing Club, financial expert Jim Cramer indicated a strong interest in purchasing more shares of Walt Disney if the stock price declines. He emphasized his intention to increase his holdings should the shares drop below the $90 mark, reasoning that current market conditions offer a strategic buying opportunity.
Cramer pointed to the ongoing slowdown in Disney’s theme park operations—which serve as a significant revenue source for the company—as a temporary challenge that he believes will ultimately resolve. Following the meeting, Disney’s shares experienced a modest rise, climbing nearly 2% to approximately $96. Notably, the experiences segment, which encompasses Disney’s theme parks, represents around 40% of the firm’s overall segment operating income, a significant drop from the 68% contribution seen in the thriving years of fiscal 2022 and 2023.
The most recent earnings report, shared on August 7, highlighted declines in attendance at domestic parks in both Florida and California, attributed to inflation concerns prompting consumer caution. Executives have forecasted stagnant attendance numbers for the upcoming quarters, with earlier mentions of “normalization” in parks demand occurring during the fiscal second-quarter earnings call in May.
Cramer Advocates for Focus on Theme Parks
According to Cramer, Disney should pivot away from solely exploring new options in the movies and television sectors and instead funnel energy into revamping and expanding its theme parks. He suggested that a diversified approach, which includes growth initiatives beyond the entertainment space, could lead to improved stock performance. “Build more theme parks,” he stated, reinforcing that these facilities generate substantial profits.
Certainly, Disney has committed significant resources to enhancing its park offerings, announcing an ambitious $60 billion investment plan over the next decade aimed at augmenting its experience-related operations, which also include cruise lines. However, the immediate challenge lies in overcoming the demand slump that has recently beset Disney’s parks.
Attendance Declines and Revenue Projections
KeyBanc Capital Markets reported that total attendance at Disney parks in September fell by 6% year-over-year and was down 12% month-over-month. Analysts from KeyBanc anticipate that Disney’s experiences unit may produce flat revenue for the fiscal fourth quarter compared to the previous year, reflecting a slowdown from the 2% growth recorded in the prior quarter. They expressed skepticism about any immediate improvement in these metrics, particularly in light of disruptions from consecutive hurricanes impacting the area.
The underwhelming performance of the parks segment has negatively affected Disney’s stock, overshadowing notable achievements such as the company’s first profitable quarter in its streaming services, which include Disney+, Hulu, and ESPN+. Year-to-date, Disney shares have lagged behind the broader market, with only a 6% increase compared to the S&P 500’s over 22% surge in 2024.
Outlook Amid Economic Changes
Despite these challenges, Cramer remains optimistic, advising investors to “stay long” on Disney stock. He pointed out favorable trends such as potential interest rate cuts by the Federal Reserve, which could bode well for consumer-focused companies like Disney. “I am counseling patience because while there is no truly visible magic bullet here, things are gradually getting better,” he concluded during the livestream of the recent Club meeting.
The Investing Club has set a price target of $130 per share for Disney, maintaining a buy-equivalent rating on the stock. Investors interested in Cramer’s trading decisions can expect timely alerts prior to any stock trades initiated in his charitable trust’s portfolio, with specific waiting periods in place before executing those trades.
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