Our Walt Disney (DIS) Sep Week One (9/2) 120 Put is deep in the money following the market’s sharp pullback over the past two weeks. While our cost basis will be well above the current share price after factoring in our net debit, this is not the kind of stock you should worry about owning for the long haul.
The potential for further consumer belt-tightening is obviously a negative for the theme park operator. Yet, travel demand remains elevated. The number of people traveling for Labor Day weekend is expected to exceed pre-pandemic levels. And spending on travel for the holiday weekend is 17% higher than it was in 2019, according to Adobe Analytics.
It’s certainly possible that Disney’s parks and experiences division will not be able to continue posting record revenue, as it did in the first two quarters of the year. But recent travel trends do not paint as gloomy of a picture as some on Wall Street seem to fear.
Disney has also been reporting strong steaming numbers for its Disney+ service, adding more new subscribers than projected for the three-month period ended July 2. Management did lower its long-term subscriber forecast, due mainly to it losing the right to air popular Indian cricket competitions. Still, they are forecasting 215 million to 245 million subscribers by September 2024.
Finally, this week, news broke that Disney is exploring a membership program similar to Amazon Prime that would offer discounts or special perks to further engage customers and harness consumer data. Discussions of a membership program are in the early stages, but it should be an interesting development to watch.
I will be recommending a call to sell soon, targeting a mix of income and potential capital appreciation.
Current Stock Price: $112.32
Net Debit: $14.27
Action: Accept shares
Cost Basis: $134.27