Will Disney (DIS) Stock Weave Its Old Magic Once Again?

The Walt Disney Company’s (NYSE:DIS) tremendous growth rate of 150% in the past five years was undone as shares of this media giant underperformed over the past one-year period. In fact, the stock was down more than 12% during this period. However, in the past three months, the company’s shares continued to trade sideways. Let’s find out whether the stock is ready to take off or whether will it need more time to recover.

We expect the recent opening of Disney’s Shanghai Resort to propel the company’s performance in the coming quarters. The $5.5 billion Shanghai Disney Resort – Disney’s second-largest theme park and its first in Mainland China – opened its doors on Jun 16, 2016. The Hong Kong Disneyland, inaugurated in 2005, marked Disney’s foray into China. With the establishment of the new resort, theme park lovers in China will now be able to enjoy attractions like Mickey Avenue, Adventure Isle, Gardens of Imagination, Tomorrowland, Fantasyland and Treasure Cove. The aforesaid resort will also have characters with fresh stories made for the Chinese people alongside two hotels, a shopping area and 99 acres of lakes, gardens and parks.

In the first and second quarters of fiscal 2016, Parks & Resorts revenues grew 9% and 4%, respectively.

This apart, the company’s movie business continues to impress with back-to-back blockbusters. After the grand success of Star Wars Episode VII: The Force Awakens, the movie Zootopia fuelled growth in the second quarter of fiscal 2016 quarter. In Jun 2016, the company released its latest 3D computer-animated comedy adventure movie Finding Dory, which shattered the box office records for animated film with a collection of $136.2 million domestically in just the opening weekend.

However, the company has been witnessing a decline in subscriber count and higher programming costs for some time now. This is a cause of concern for investors. Disney’s primary cash cow, ESPN, has been under immense pressure with the continuous change in the Pay-TV landscape owing to migration of subscribers to online TV. We expect the falling subscriptions to have a telling effect on the network’s ad revenues. In the last reported quarter, ESPN’s ratings were affected by change in time of bowl games. ESPN’s ad revenues declined 13%.

Disney currently carries a Zacks Rank #3 (Hold) and shares the space with the likes of Twenty-First Century Fox, Inc. (NASDAQ:FOXA) , Time Warner Inc. (NYSE:TWX) and Comcast Corporation (NASDAQ:CMCSA) .