If the stock price trended downward, Jim Cramer would become a buyer of Walt Disney. “I want to buy more,” he said Wednesday at the investment club’s October meeting. He added that he would consider adding to his position if the stock price fell below $90 per share. He said it makes sense to buy on the bear because the slowdown in Disney’s theme park business, the company’s revenue driver, will eventually abate. Shares rose nearly 2% on Wednesday to about $96 a share. Disney’s experiences division, which includes theme parks, accounts for about 40% of the company’s overall segment operating profit, Piper Sandler said. This is significantly different from the combined 68% contribution from experiences in FY2022 and FY2023, when the theme park business was booming after the coronavirus. Disney’s latest quarter, reported Aug. 7, showed weakness in its domestic parks in Florida and California as consumers wary of inflation became more cautious. In addition to these fiscal third-quarter numbers, the company predicted flat attendance in the coming quarters. Executives first mentioned a “normalization” of park demand in May as part of the company’s second-quarter earnings call. Jim said Disney needs to shift its focus from “exploring what’s next” in film and television and focus on its theme parks, which are central to the company’s growth. He argued that if Disney “can create some kind of long-term growth path that involves something other than movies and ESPN,” the company’s stock price should eventually rise. Theme parks are profitable, so “build more theme parks,” he added. To be sure, the company has committed to spending a lot of money on its parks, announcing a little more than a year ago a $60 billion investment over 10 years in its experiences business, which also includes cruises. The challenge, at least in the short term, will be dealing with weak demand for Disney theme parks. Total park attendance in September was down 6% year-over-year and 12% month-over-month, according to KeyBanc Capital Markets geolocation data released Tuesday. KeyBanc analysts expect fiscal fourth-quarter revenue from Disney’s Experiences division to be flat year over year. This would be a slowdown from the 2% annualized growth seen in the previous quarter. Analysts at KeyBanc said they are “struggled to see why either of these metrics would improve,” especially after the disruption caused by back-to-back hurricanes Helen and Milton. DIS YTD Mountain DIS stock price performance since the beginning of the year. The parks’ disappointing performance weighed on Disney’s stock price and even overshadowed the company’s first-ever quarterly profit for its integrated streaming business, which includes Disney+, Hulu and ESPN+. Stocks have underperformed the broader market since the beginning of the year, rising just 6% in 2024 compared to the S&P 500’s gain of more than 22%. But Jim’s message was to “hold on” to stocks for a long time, saying the Federal Reserve is cutting interest rates. Interest rates could be a bullish sign for consumer companies like Disney. “There is no visible silver bullet yet, but the situation is gradually improving, so I encourage patience,” he said in a livestream of Wednesday’s club meeting. The club has a price target of $130 per share and has given Disney stock a rating of 1, equivalent to a buy. (Jim Cramer’s Charitable Trust is a long DIS. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. I will receive it. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
