The past two and a half years have been quite disappointing for Walt Disney investors. Subscriber growth at the company’s streaming service, Disney+, helped the stock climb to a record during the first year of the pandemic. Unfortunately, first the share price in 2021 and then the subscriber numbers started going downhill in 2023. Yesterday, DIS closed at $84.16, down 58.6% from its all-time high at $203.
Of course, Disney is not an ordinary business. During its 99-year history, it has survived through wars, recessions, inflation and the Great Depression. Recent years have put the company to another test and we have no doubt it will survive this one, too. Its long history, profitable business model and place in children’s minds give Disney what Warren Buffett likes to call a “moat.”
Is Disney an Attractive Long-Term Pick After its 59% Drop?
Usually, when the market value of a great business declines significantly, that is a buying opportunity. Can we say the same for Disney ‘s recent weakness? Let’s first examine the Elliott Wave chart below.
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Disney ‘s daily chart reveals that the drop from $203 has taken the shape of a five-wave impulse. The pattern is labeled (1)-(2)-(3)-(4)-(5) in wave A, where the five sub-waves of wave (3) are also visible. The impulsive structures of waves 1 and 3 of (3) can be recognized, as well. Both 5 of (3) and (5) seem to be ending diagonals.
The theory states that a three-wave correction in the opposite direction follows every impulse. This means that we can, indeed, expect a notable recovery to ~$150 soon. Keep in mind, though, that impulses point in the direction of the larger trend. Once the corrective recovery in wave B is over, wave C should drag the price to new lows below $80. In our opinion, that is when the actual long-term buying opportunities would present themselves.
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