From Pixar To Property
The past several months have been filled with hopes and dreams of our society transitioning from our reality to a new form of reality, the metaverse. For months the hype has been the buzz in the crypto world with companies like Facebook, Microsoft, and now JP Morgan betting on virtual real estate to play an essential part in our lives. Unfortunately for them, the metaverse is already here and it sucks. For those who have played VR chat, you’ll understand what I’m talking about. On Tuesday, Disney appointed a new executive to the company’s metaverse strategy. Disney is one of the few companies that has the advantage in the metaverse, second to gaming companies, based on the fairytales and animated series’ they’ve produced. They’ve also announced something for the real estate investors, actual real estate.
On Wednesday, February 16th, Disneyland announced its plan to create its own community in the heart of Coachella Valley, California. The goal of this project is to sell to the “die-hard” Disney fans who have fantasized about living in the Haunted Mansion or in Radiator Springs. It is said that the neighborhood will feature estates, single-family homes, and condominiums. “Walt Disney dreamed of building a utopian town in the 1960s that would have been a testbed for futuristic city planning. Disney’s vision for an Experimental Prototype Community of Tomorrow eventually morphed into the Epcot theme park at Disney World.” (Macdonald, East Bay)
The 618-acre project is already underway. I couldn’t find any details on pricing yet but it is safe to say it won’t be cheap. Disney continues to branch into different ventures of business to maintain resilience through these trying times. The company’s most recent report showed an increase from $0.02 EPS to $0.63 eps in the prior year. Their new streaming service has continued to perform well with a total of 129 million subscribers as of January 2022 which increased from 117.2 million in the last quarter. This result is well deserved with constant quality in their Disney+ releases including The Mandolorian, Encanto, and the anticipated Obi-Wan Kenobi series is set to debut on May 25th. Accompanying the streaming numbers is a bounce-back in theme park revenue, hotel stays, and cruise bookings. “Disney said the growth in revenue came as more guests attended its theme parks, stayed in its branded hotels, and booked cruises.” (CNBC)
It is safe to say that Disney may be inflation-proof but not covid-proof. Following the closure of stores and theme parks, the company struggled to stay afloat until their Disney+ launch helped the bounce back. Looking forward the company will likely remain profitable as covid restrictions begin easing up.
From an investment standpoint, Disney looks like a stock to help beef up your portfolio. Aside from share purchases, options trades may be optimal as well. Yesterday, February 16th, 6,000 180/90 July call spreads were purchased for the company. If we take a look at the chart the stock is trading below its 100-day moving average. The stock is coming up into 156.64 resistance and has the potential to reach the 168.81 level sitting above it. After filling the gap from 2020 (grey box below) the upside gap is the next target at 173.68.