Please ensure Javascript is enabled for purposes of website accessibility

Here's My Top Robinhood Stock to Buy Right Now

By Will Ebiefung - Jan 23, 2021 at 7:47AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

COVID-19 might have been a blessing in disguise for this legendary entertainment giant.

Commission-free trading app Robinhood is a heat map of what is popular among retail investors in the stock market. And it's no surprise that Walt Disney (DIS 2.28%) ranks among the top 100 most widely held companies on the platform, considering its catalysts for long-term success. 

The entertainment giant has seen its shares soar roughly 20% over the last 12 months as it recovers from the impacts of the coronavirus pandemic, while implementing its new streaming-focused strategy. Let's explore the reasons why Disney is my top Robinhood stock to buy right now. 

Soaring stock chart

Image source: Getty Images.

Why Disney?

In December, Disney premiered the season finale of its sci-fi series, The Mandalorian, on Disney+. Nielsen's chart estimates the program was the most streamed show between Dec. 14 and Dec. 20, beating out rival Netflix for the first time. This milestone demonstrates the viability of Disney's new streaming strategy, which is evolving into an industry leader because of its edge in original content.

The Mandalorian, which takes place in the Star Wars universe, is a perfect example of Disney's ability to monetize its treasure trove of intellectual property. Unlike show concepts built from scratch, the Mandalorian tapped into an already established Star Wars fanbase, potentially giving it an edge in viewership. Disney boasts other high-profile assets, including the Marvel Cinematic Universe and Pixar.

Netflix still holds the lead in the streaming wars, but Disney+ is quickly gaining ground. Disney's platform now boasts 87 million subscribers and expects to have 230 million to 260 million by 2024. To put that guidance in perspective, Netflix boasts 195 million subscribers right now and generated a net income of $2.8 billion in the trailing 12-month period. 

Compelling valuation 

Disney boasts a price-to-sales (P/S) multiple of 4.7 on a 12-month revenue of $65.4 billion. While that multiple doesn't mean much without factoring in profits (and Disney currently isn't profitable), it does suggest that Disney offers better value compared to rivals in the amusement park and streaming business spaces. Netflix and Six Flags (SIX 5.23%) report P/S ratios of 9.6 and 6.1, respectively. 

Disney is also making impressive progress in recovering from the coronavirus pandemic, which is still a significant headwind. Fourth quarter revenue fell 23% to $14.7 billion because of 52% and 61% declines in the studio entertainment and amusement park businesses, respectively. But that is a substantial improvement from the third quarter when amusement park revenue fell 85% against the prior-year period. 

Disney's studio entertainment business is recovering much slower, but this seems to be by design as the company pivots to a direct-to-consumer strategy. In October, the company announced plans to reorganize its media business around streaming. And management has released several high-profile studio creations on Disney+ while theater attendance remains subdued because of the pandemic. 

Disney stock is a buy 

Investors shouldn't let near-term challenges (especially those induced by the coronavirus pandemic) distract them from long-term opportunities. Disney stock is a compelling investment because of its rapidly growing streaming business and the slow but steady recovery in its amusement parks. The company's reasonable valuation adds icing to the cake, making it a welcome addition to your portfolio. 

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$105.61 (2.28%) $2.35
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$191.40 (1.90%) $3.57
Six Flags Entertainment Corporation Stock Quote
Six Flags Entertainment Corporation
SIX
$29.79 (5.23%) $1.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.