The Walt Disney Company (DIS) has just been upgraded to A+ status by the Morningstar credit ratings agency. This effectively means that Walt Disney offers creditors and investors a low default risk profile. The Walt Disney Company was trading at $103.78 towards the end of the trading session on Monday, 5 October 2015. The 52-week range for the company is $78.54 on the low end and $122.08 on the high end. The company's market capitalisation is $175.23 billion, with a price-earnings ratio of 21.61 and earnings per share of 4.80. The bump up on the credit rating added fresh new impetus to upwards pressure on the stock price, which has suffered in recent weeks. The company's 50-day moving average (MA) price is $102.30, and Walt Disney Company has a 200-day moving average of $109.03.

The last time the Walt Disney Co. issued its quarterly earnings reports was on 4 August 2015. The earnings per share at that juncture were $1.45, $0.03 higher than Thomson Reuters’ expectations. Year-on-year, the quarterly EPS were substantially higher than the 2014 figures which came in at $1.28 per share. The consensus estimate for earnings for the quarter was $13.24 billion, but the Walt Disney Company missed expectations with earnings of $13.10 billion. This led to sharp declines in the stock price, but several measures have been implemented to boost investor sentiment. Year-on-year, the quarterly earnings increased by 5.1 percentage points, and economic analysts are of the opinion that the company will post earnings per share of $5.08 per 2015. For these reasons, traders will be well-poised to place call options on the stock.

What are Analysts Saying about Walt Disney Stock?

On a scale of 1.0 – 5.0, where 1.0 represents a strong buy and 5.0 represents a sell, Disney is currently at 2.2. This is unmoved from last week. Put in perspective, it represents the general consensus that Disney stock is indeed on a bullish uptrend. The mean target price for the stock is $118.57 with a high of $148 and a low of $89. Viewed in perspective, it is clear that Disney stock is perhaps slightly undervalued, with upside potential. However, the year has been peppered with multiple upgrades and downgrades, including the following:

·         Jefferies downgraded Disney from a buy to a hold on 5 August 2015

·         Wells Fargo downgraded Disney from outperform to market perform on 18 August 2015

·         Bernstein downgraded Disney from outperform to market perform on 20 August 2015

·         Credit Agricole upgraded Disney from a market perform to an outperform on 2 September 2015

For the current month there has been a slight decline in the number of strong buys, but there has been an increase in the number of holds.

Traders Eager to Follow Suit after Walt Disney’s $2.4B Stock Purchase

The Walt Disney Company did what so many other economic juggernauts do when things turn bearish: They bought their own stocks. Apple has done this, and so have many other companies that have sought to reassure investors of top management's faith in the company. In September, Disney's Bob Iger got under investors’ skin when he told them that the company had divestiture measures in mind and that the bottom line would be impacted at Walt Disney. When share prices plunged from over $122 to below $100, the top brass at the company got nervous and decided to buy $2.4 billion of Disney stock to reassure investors that everything is hunky-dory. There is certainly plenty of merit in investing in the Walt Disney Company (DIS), as indicated above.

So what are the chords that Walt Disney is thinking of cutting?

The Disney media networks component comprises 46% of the company's annual revenue stream, and of that, the cable properties forms a large component. For example ESPN generates $6 per month in carriage fees for every subscriber. Disney is moving away from cable bundling, and ESPN is going to bear the brunt of it. As a result, some $350 million worth of capital financing is going to be cut over 2-year period from ESPN. With many more people cancelling their cable subscriptions (as a result of live streaming), the impact on Walt Disney is as yet unknown. Despite the negative press being generated by the chord-cutting phenomenon, the relaunch of Star Wars is bound to generate massive revenue streams for the company. This includes things like ticket sales, DVDs, theater ticket admissions, toys and licensing. But more importantly for Disney is the rapid growth of its theme park revenue streams. In the six years between 2009 and 2014, theme park revenues increased by 50%. In 2014 alone theme park revenues accounted for 31% of Disney's overall revenue. Some other points that you have likely not heard about include the following

·         Disney is contemplating switching to demand-based ticketing prices

·         Disney acknowledges that raising prices alone will not solve the problem of overcrowding or sub-optimal attendance.

·         By factoring in a new pricing model, Disney parks can remain competitive for low and middle income families

·         Demand-based ticketing would ultimately raise the bottom line for Disney theme parks which grew to $11.8 billion for the fiscal year ending in September 2015

·         A single day pass for Walt Disney World in Orlando is $105 at the top end and $99 for Disneyland in Anaheim

For all of these reasons, it makes perfect sense to go long on Disney stock.