Investing

Hot Stock: Disney

Improving economy bodes well.

With less than two months until school’s out, parents across the globe are starting to plan their summer vacations. Where’s a great place to go for a week-long getaway? A Disney theme park, of course.

It may be easier to stomach the cost of going to a Disney park if some of that dough that you’ll spend will eventually make its way back into your pocket. And the best way to get a financial return on your Disney-related investments is to buy some company stock.

According to Bloomberg, nearly 70% of the analysts who cover Disney (NYSE: DIS) say it’s a buy. Part of the reason is strong theme park performance. David Bank, an analyst with RBC Capital Markets, expects park-related revenues to increase by 11% in Q2— the quarter’s results will be announced on May 7. In an April 29 report, Goldman Sachs analysts also pointed out that theme park growth is accelerating—likely because economic conditions are improving stateside, so people have more disposable income—and that’s a big reason why it has a buy on the stock.

Of course, there’s a lot more to Disney than roller coaster rides and photo ops with life-sized cartoon characters. Bank, also in an April 29 report, said that Disney’s media division, which includes ABC, ESPN and other networks, should see a 10% year-over-year increase in revenues in the just finished quarter, partly due to 5% advertising growth among its cable networks. Overall company revenues will likely grow by 8.4% in Q2, he wrote.

New cable network affiliate deals, continued park growth, upcoming Star Wars movies and the launch of a Shanghai theme park in 2015 should keep earnings growing over the long-term. Bank has a $3.42 earnings per share estimate for 2013 and $3.89 for 2014.

Disney’s share price has currently surpassed Bank’s target of $63, but he thinks that in the best-case scenario it can hit $70. Goldman Sachs predicts it will get to $70 over the next 12 months, while other analysts have it hitting $72.

So before you spend a few hundred dollars on Disneyworld tickets this summer, you might want to consider purchasing a few of the company’s shares. The capital gains—and its 1.17% yield—will hopefully cover all those Magic Kingdom costs.

For more investing insights, follow Bryan on Twitter @bborzyko.

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