It is a beautiful Monday morning and I am excited about the possibilities that this week holds as we start with an exploration of the options of Walt Disney Co (NYSE:DIS). Possibilities in Walt Disney Co came to my attention after it was initiated with a “Buy” rating at UBS with a $106 price target to mark a 12.74% upside over the current $94.02 trading price. I last wrote about Walt Disney in June when the stock was trading at $84.42; hence, the stock has gained 11.37% in six months to the current $94.02 trading price.
Can Walt Disney Meet the $106 Price Target?
The chart above shows how the shares of Walt Disney have traded in the last one year and I intend to use technical analysis to confirm or refute the possibility of seeing a 12.74% increase the stock’s share price in the next six months.
Shares of Walt Disney have gained 37.75% in the last one year from a 52-Week low price of $68.60 to a 52-Week high of $94.50. You will observe that the stock has been stubbornly bullish (Green) as it continued to make new highs.
The more interesting point is that the stock only entered “overbought” territory (Purple) once earlier this year and it has not been overbought since then. The stock currently sports an RSI of 66.05, which suggests that Walt Disney still have more room to soar before the buying action slows down.
Interestingly, the fact that the stock has only entered “overbought” levels once this year suggests that the stock might experience a minor pullback before rising to new highs. You will observe that Walt Disney has been alternating between successive periods of reaching new highs at peak (Blue) only to record a pullback (Red) before picking up with to attain another high in the cycle.
Can Walt Disney Sustain the Bullish Trend?
Large Portfolio of High-Profile Brands
The first reason Disney will be able to sustain the bullish trend going forward is monetization appeal available in its large portfolio of strong brands. Walt Disney is the parent company behind many globally recognized brands such as Walt Disney, ABC, ESPN, Marvel Entertainment, Touchstone Pictures and Lucasfilms among others. This strong brand portfolio offers the company a huge competitive advantage and it presents an economic moat that ensures future profitability for the company.
In addition, Walt Disney has penned a number of content distribution agreements with companies such as Netflix, Comcast and Cox Communications among others. Such content distribution agreements will enhance revenue generation by Disney’s subscription streams to further boost the top and bottom lines going forward.
Exploring Possibilities in New Markets
The second reason I am optimistic about Walt Disney going forward is its venture into new markets. It is no longer news that the North American market is already in its matured age; hence, the company’s venture into new markets will ensure that Walt Disney does not suffer a reduction in revenue.
Walt Disney has already upgraded its operation in Russia, China and India. The Shanghai Disney Resort, which includes Shanghai Disneyland, two themed hotels, and retail, dining and entertainment venue is Walt Disney’s attempt at breaking out into emerging markets. In addition, Walt Disney is planning to open the largest Disney store in Shanghai by early 2015.
How to Trade DIS Options
I am optimistic about the possibilities in the shares of Walt Disney going forward and I recommend buying DIS call options. The DIS Feb 2015 97.500 call (DIS150220C00097500) looks attractive at an asking price of $1.20. I recommend buying the call options with a $2.50 price target, which will set us up for a 108.33% upside potential when shares of Walt Disney reach $100 per share.
— Daily Option Alerts