The year 2013 was a considerable one for stocks, with the S&P 500 index rising by more than 29% and the Dow Jones Industrial Average (DJIA) rising by 26.5%. Both major index readings were their highest closing bell prices ever. It turns out that Walt Disney Co. (NYSE: DIS) blew that performance out with 55% gains, also at record highs. 24/7 Wall St. has generated a bullish and bearish scenario for 2014 in each stock of the Dow (and in major indexes).
For starters, there are many macroeconomic factors to consider in a company like Disney. It is in media, entertainment, products and more. Most Wall Street strategists are forecasting higher price targets for stocks in 2014, and the hope is that this rising tide can lift Disney as well.
The Federal Reserve is about to get a new chairman, and it is generally expected that interest rates will rise gradually. Europe and Asia are exiting their recessionary states at the same time that U.S. gross domestic product (GDP) is expected to tick up.
Disney closed out 2013 at $76.40, and its current dividend yield for 2014 is 1.1%. Its consensus price target was $76.43 at year-end, so analysts feel it is fully valued.
One issue to consider about the continued market gains at the end of the year was that Disney rose by almost 10% in the final month of the year, and almost 20% in the final quarter. Disney has bought a major growth vehicle in Star Wars, where this $4 billion should translate into billions of dollars of growth in the next generation. Disney dominates in movies now that its acquisitions of Pixar and Marvel have serious prospects for the future.
The company’s media unit and theme parks should keep doing well as long as the economy holds up. If GDP is rising, that offers a good base. Disney’s stock market cap is now $136 billion as well.
Where Disney runs into a problem under a bearish scenario, similar to other high-flyers of the DJIA in 2013, is in its valuations. The analyst community feels that Disney is fairly valued, although the price target has ticked up to $77.22 since the end of 2013, and the stock price has dropped down to about $75.40. Disney trades at a market premium valuation at 19 times expected 2014 earnings.
The good news is that the highest analyst price target is now $90.00, so maybe the Mouse House can continue to gain anyway. It just seems as though new investors may have to put Disney on a shopping list rather than chasing it up and up, a list to buy on pullbacks.
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