Walt Disney (DIS) Stock: Is This Still A Strong Investment Option?

Walt Disney Co (NYSE: DIS)

Walt Disney has long been regarded as a strong investment choice. Throughout decades, the company has been able to capture the imaginations of children young and old, turning a hefty profit along the way. However, more recently, the stock has been on a decline. Since reaching its peak at $120 per share in July of last year, we’ve seen relatively steady declines on the stock. There are a couple of very good reasons for this. Today, we’ll talk about those reasons and whether or not DIS stock is still a strong investment option.

ESPN Is Weighing Heavily On DIS

At one point, ESPN was a great thing for Walt Disney. The sports television network was enjoying growth in subscriptions and great profits. However, more recently, ESPN is a network that’s been having problems, and that’s causing issues for the stock. Because of the declining hopes of ESPN profit, the asset is now considered a weight on the corporation.

To make matters worse, ESPN continues to be hit with more and more bad news. In the past, the network was considered to be somewhat of a staple network for cable and satellite television bundles. However, that’s changing, and it’s happening quickly. In fact, Dish just announced the networks that would be included in its “Skinny” bundle. Unfortunately, ESPN was left out of the bundle, which is another big hit to DIS.

Economic Conditions Weigh Heavily On The Entertainment Industry

While ESPN definitely isn’t doing anything good for DIS at the moment, it’s not the only, nor the biggest, problem that the company is facing at the moment. By nature, Walt Disney is an entertainment company. The company owns theme parks, television networks, movie production companies, massive entertainment franchises (like Marvel), and more. This is a great product line up. That is, when economic conditions are positive. However, when economic conditions are negative, consumers look for ways to save money. One of the first places they look is at entertainment.

Unfortunately for DIS, economic conditions aren’t positive at the moment. While the United States recently released a strong jobs report, the GDP – the more important figure that gives a broader view of economic conditions in the nation – was overwhelmingly negative. Not to mention the economic hardships we’re seeing in Asia and Europe. The bottom line is that the world’s largest economies are on the brink of a recession, and that’s weighing heavily on DIS.

Is This Still A Strong Investment Choice?

In the long run, I believe that Walt Disney will do overwhelmingly well in the market. However, the short-term view really doesn’t look good. As a company that’s heavily dependent on economic conditions, DIS clearly has some headwinds ahead. In the future, the company really should find a profitable way to offload ESPN and focus on core, profitable assets. Nonetheless, there’s no other company in the entertainment industry that can even come close to comparing to the success of Disney. So, there’s no other company in the industry that has the ability to recover from hard times like this one.

What Do You Think?

Where do you think DIS is headed? Join the discussion in the comments below!

[Image Courtesy of Wikipedia]

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