One of the lessons seasoned investors learn is that it's a waste of time to try and time the market. Another lesson is that winners generally keep on winning. These two lessons are amply illustrated if you have followed Walt Disney (DIS +2.18%) stock over the past few years.
The entertainment giant probably had its worst financial year on record last year. For full-year fiscal 2020 (which ended Oct. 3, 2020), sales for the year decreased 6%, largely as a result of the negative economic effects created by the coronavirus pandemic. The revenue drop would likely have been much worse except sales were flying high (up 36% year over year) in the fiscal 2020 first quarter (which ended Dec. 28, 2019). Decreases started in Q3 of fiscal 2020 and have continued into fiscal 2021, with a 22% drop in the first quarter (ending Jan. 2, 2021).
And yet, Disney's stock price over the past 52 weeks is up an impressive 73.7%.
Image source: Walt Disney.
Looking at opportunity, not price
Obviously, investors are confident in Disney's future recovery from the pandemic. So am I. That's why I bought stock in the company when a recent opportunity to get it at a small discount came up.
I wasn't fortunate enough to buy Disney stock when it bottomed out with the broader market on March 23, 2020, at $81.09 a share. Those with enough foresight and cash on hand to do that have already seen their stock purchase more than double in value (it's up 127%).
I would've loved to maximize my investment by buying at that March 2020 low, but worrying about timing the market just adds stress, with little to nothing in return for that worry. Missing out doesn't mean that the opportunity is over. The point isn't what I missed, but what's still to come. I think Disney as a company has a tremendous future ahead of it (and so does its stock price).
There is still room for Disney stock to grow
Disney has several market advantages over its peers. The most relevant at the moment is its media library and content-creation machine, which work together to give Disney an unbeatable edge. The entertainment company owns several production studios, and it's planning to release more than 100 new entertainment titles a year for the next few years through its direct-to-consumer (DTC) operations.
This has always been an important part of Disney's operational power. But with the rise of streaming services, it's even more valuable and even more a centerpiece of the company's strategy.
A significant DTC focus is Disney+, which has been an outstanding success since the streaming service launched in November 2019. Beat all estimates, it reached more than 100 million paid subscribers in March 2021, and it's only beginning to launch globally. Disney wrested full control of another DTC focus -- general content-streaming site Hulu -- in 2019.
Between Disney+, paid Hulu subscriptions, and ESPN+, the company has more than 150 million paid subscribers. It also recently started launching a global general content-streaming site called Star in several global locations. Direct-to-consumer revenue was up 73% year over year in the 2021 first quarter.
Management revised guidance for total subscriptions to reach up to 350 million by 2024. Disney is investing heavily in DTC expansion right now but expects these services to become profitable in 2024 as well. This is why investor confidence is running high. Streaming is hot, and Disney is front and center.
Image source: Getty Images.
But Disney is much more than just its streaming services. It's also the leader in theme parks, which are currently partially open and running at a limited capacity. As vaccinations increase and the pandemic ends, management fully expects that the segment will get back to its typical sales growth (which was 13% for full fiscal 2019).
Disney is already showing some signs of recovery. Revenue in Q1 2021 was down 22% from a well-above-average 2020 figure, but it was 14% ahead of 2019's total. Disney won't demonstrate a complete recovery until all the pandemic is declared over, but it's still managing quite well with what it has at the moment.
History is on Disney's side
Some of this confidence in management is already baked into the current stock price, but Disney is building enough momentum to keep growth going into the future. This relates to the winners-keep-on-winning lesson.
Disney is already a blockbuster company with a talented team producing mega-hit films and managing a huge collection of parks and products. Its stock price has steadily risen and is up more than 300% over the past 10 years. That's not super-growth territory, but I'm not looking for super growth in every stock. A balanced portfolio has super growth stocks as well as stocks with consistency and dependability. Disney stock consistently and dependably gains value over time.
I missed buying Disney stock at its 2020 low, and the price has actually pulled back a bit from when I bought it earlier this year. But I'm totally cool with that. I expect a bit of volatility while the pandemic continues to influence traders and some dips over time. But I'm looking at the long term. I'm confident in Disney's prospects and that the value of my investment will grow.
