Should You Buy This Stock As Biden Lifts Mask Restrictions?
When Covid hit last year almost all business worldwide came to a complete halt…
In the year and a half since then things have started to open slowly.
That accelerated last week when President Biden announced the lifting of most mask restrictions for fully vaccinated people.
To help you figure out how to take advantage of this to grow your retirement portfolio, today, I’m going to answer – Should You Buy Disney As Biden Lifts Mask Restrictions?
Because I can’t think of another company on Earth that will benefit more from getting back to “normal” than this giant.
To learn why I told you to avoid Disney back in November use the link above.
Its an amazing business with various world dominating industries – TV, content, characters, movies, cruise ships, hotels, parks, and its new Disney+ streaming platform as well.
Disney isn’t just a great business… Its one of the best on Earth. In large part due to its stable of characters in the following universes.
- Star Wars
In fact, its so powerful that its regularly voted as one of the top 20 most valuable brands in the world.
Even with this though, I told you not to buy Disney due to its high valuation back in November.
Today I want to help you figure out whether you should buy it now that its parks are back open, Biden is lifting the mask mandate for vaccinated people – which allows us to start getting things back to somewhat normal, and we approach the normally busy Summer travel season.
All these things will help Disney continue to grow as we exit – hopefully – this pandemic… And that’s all its share price has done since I told you to avoid it in November.
Since then, its shares are up 16.5%… So, was I wrong to tell you to avoid Disney?
If you buy overvalued investments, you have a far higher likelihood of losing money. Which increases your risk a ton.
And you don’t want either of these things in your retirement portfolio.
Yes, Disney is still great – and will get even better now that the US – and much of the world – looks to be at least partially reopening things.
Disney will remain great for decades and probably even longer because of its enormous competitive advantages.
But you should still wait to buy its shares until its cheap enough to do so… If you do, you’re almost guaranteed to earn higher returns over the long term because your risk will be far lower.
This is especially true now after it released its most up to date quarterly earnings on May 13th.
Revenues fell in the year-to-year quarterly period 13% to $15.6 billion due to the continued Covid closures… That are now ending. But operating profits rose 95% to $912 million in the quarter.
Yes, in the first six months of its fiscal year, operating profits are still down 64%… But again, that’s been while most things were still closed.
Now things are opening again – fast.
Air travel is at levels not seen in the last 16ish months we’ve dealt with this pandemic.
Biden last week announced that fully vaccinated people no longer must wear masks… Which will get us back to somewhat normal.
And sporting events, theatres, etc. are beginning to see full capacity shows again for the first time in almost a year and a half.
These things all will affect Disney positively. Especially as we head into the busy Summer travel season when many families take trips to Disney parks, watch their movies, etc.
What makes this all even better… Disney+ is still crushing it as well.
It’s now up to 103.6 million paying monthly subscribers worldwide. Last year when the pandemic began this was only 33.5 million.
During the pandemic Disney+ has been pulling most of the weight for the company… Now this is a massive new strength with more than 100 million monthly subscribers… So now that Disney parks, theatres for its movies, etc. are opening again – its poised to do even better in the coming months.
In fact, I’d bet that out of almost any company on Earth – Disney will benefit more from Biden lifting mask restrictions and us getting back to “normal” more than anything.
So, should you buy it now because of all this – and the stuff in the previous article?
Unfortunately, no… It’s still too overvalued.
Its P/E is now 51.2.
Its P/CF is 71.7.
Its forward P/E is 192.3.
And its EV/EBIT is now a mind boggling 168.3.
On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.
And on EV/EBIT I look to buy stocks below 8.
These metrics combined show that DIS is massively overvalued right now.
And this means owning its stock does not give you a large margin of safety in investing terminology.
When you invest in stocks that have a margin of safety it makes the investment safer. And it also means you should expect to earn higher returns owning it in the coming years.
The inverse of this is also true…
When you invest in a stock without a margin of safety it makes the investment riskier. And it also means you should expect to earn less owning its stock going forward.
With DIS being so overvalued right now, its stock does not give you a large margin of safety.
And for this reason, you need to remain patient and wait to buy it.
Yes, even though it will continue doing great things.
If you wait, you’ll make more money and keep your retirement portfolio safer.
Recommendation – Avoid Disney until its cheaper to protect your retirement portfolio.
And consider investing in some of these stocks instead for your retirement portfolio.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.
P.S. Breaking Poll – Will The Economy Get Back On Track Now That Mask Restrictions Are Lifted? Vote Here