Earnings season in a bear market can turn even a blue-chip stock into what looks like a penny stock with big moves up or down – usually down. But patient investors who buy an industry-leading company during a down market can get a great value.
Patient investors can earn a great return buying values and waiting for the market to recover. And, as that happens, traders tend to be more forgiving in future quarters for a company during bull markets.
The recent earnings of The Walt Disney Company (DIS) sent shares to a new 52-week low. The entertainment giant reported a slowdown in its streaming division. With a miss in earnings and revenue right now, it’s clear short-term traders weren’t too happy.
But the company has had its ups and downs before. Disney has shown over the years that it’s able to raise prices and keep up with inflation over time. And with higher revenue in divisions like parks, it’s clear that consumers are still willing to spend money.
Action to take: Shares are worth accumulating under $90. The company has a strong branded position in its entertainment properties. And while the stock doesn’t currently pay a dividend, a rebound in coming quarters could lead to outsized returns for shareholders today.
For traders, shares are likely to come off their post-earnings drop in the coming weeks. The December 16 $90 calls, last going for about $2.95, can likely deliver mid-double-digit returns in the next few weeks.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.