This stock is looking a bit overbought, and if it falls to this level, it will be a tremendous buying opportunity.
Disney (NYSE: DIS) announced today that it will reopen its Southern California theme parks in mid-July after a fourth month hiatus due to the coronavirus pandemic.
Disney Parks, Experiences and Products business said that its Disneyland and Disney California Adventure will open on July 17 with precautions in place to make it a safer experience for guests and staff, though its reopening hinges on approval from the California government.
July 17 also happens to mark the 65th anniversary of the opening day of Disneyland, so the date could be good luck.
Disney shares have been climbing higher since hitting bottom on March 23 on the hopes of a rebound as it reopened its parks around the world and returned to production for its movies and shows as lockdown restrictions eased.
Even as the stock is down more than -15% year-to-date, since that bottom, the stock is up 42%, just slightly lagging the S&P 500’s gain of 42.6% in the same timeframe.
But even as the stock rebounds off that bottom, Miller Tabak chief market strategist Matt Maley warned this week that investors should tread carefully with the stock given its recent price action.
“It’s very similar to what it saw in late March after is initial bounce after a big sell-off in the first quarter,” Maley said, adding that the stock is looking a bit overbought. “It could pull back. You don’t want to be too aggressive up here.”
However, if Disney shares do pull back, there are two key levels to watch for that will provide good buying opportunities.
“The 200-week moving average down at about $114. That’s provided excellent support for the stock, so that’s a level you want to get more aggressive,” Maley continued. “If, for some reason, the market gets hit and this gets thrown out… the $100 level, that’s provided great support back in May. That’s where you really want to back up the truck. So, be a little cautious up here, get aggressive at $114 and buy it with both hands if it gets anywhere near $100.”
From the current price, Disney shares would need to fall -6.7% to reach the $114 level and -18% to reach $100.
Disney received approval to reopen its Disney World park in Florida late last month, with plans to begin reopening on July 11.
“We’ve done everything we can to open up responsibly,” said Disney CEO Bob Chapek regarding the Disney World reopening. “Taking the guidance of local health officials, state health officials, national heath officials, plus our own well-qualified doctors on staff to create an environment to create new operating procedures, to create new policies, to do new training, new standards of hygiene.”
Chantico Global CEO Gina Sanchez believes Disney is in a strong position as it begins to reopen its parks.
“If you look at parks, everything has shown that Disney has tremendous pricing power and tremendous brand value,” Sanchez said. “Now obviously, they have a tremendous amount going against them. Quite frankly, the valuation is reflecting all of those positives, and so it’s not necessarily well valued. But its balance sheet is very good, it has good net interest coverage, it has access to debt, and it definitely is a survivor.”