Patience Can Bring Double-Digit Returns From Disney Stock

by Trefis Team
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Walt Disney stock (NYSE: DIS) increased by an impressive 54% in the last six months (126 trading days) and currently trades at $190 per share. The recent rally in DIS stock was driven by strong performance of its streaming business, Disney+, as streaming demand has been high during the pandemic. Disney+ is able to boast a total global subscriber count of 95 million in just one and a half years since its launch. To put things in perspective, Netflix achieved a subscriber count of 200 million after a decade of operations; at the current rate Disney is likely to reach the milestone is a much shorter time. In addition to strong demand for streaming, with gradual lifting of lockdowns and a successful vaccine rollout, market expectations of Disney’s traditional businesses, like cable and theme parks picking up over the coming quarters is also high. This led to investors’ keen interest in DIS stock which led to an impressive rise in its price. But will Disney’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?

According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for DIS stock average close to 5% in the next three-month (63 trading days) period after experiencing a 54% rise over the previous six-month (126 trading days) period. Notably, though, the stock is likely to underperform the S&P500 over the next three months, with an expected return which would be 1.5% lower compared to the S&P500.

But how would these numbers change if you are interested in holding DIS stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test DIS stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF DIS stock moved by -5% over five trading days, THEN over the next 21 trading days, DIS stock moves an average of 2 percent, which implies a return which is almost in line with that of the S&P500.

More importantly, there is a 58% probability of a positive return over the next 21 trading days and 37% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of DIS Stock Movements:

Question 1: Is the average return for Walt Disney stock higher after a drop?

Answer:

Consider two situations,

Case 1: Walt Disney stock drops by -5% or more in a week

Case 2: Walt Disney stock rises by 5% or more in a week

Is the average return for Walt Disney stock higher over the subsequent month after Case 1 or Case 2?

DIS stock fares better after Case 2, with an average return of 2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.6% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Walt Disney stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Walt Disney stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For DIS stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

DIS’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Walt Disney stock by changing the inputs in the charts above.

Want upside from growing digitization post Covid-19, but don’t want to pay a big premium for tech stocks? Check out our theme on Value Tech Stocks

 

See all Trefis Price Estimates and Download Trefis Data here

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