We recently published a list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. In this article, we are going to take a look at where The Walt Disney Company (NYSE:DIS) stands against other stocks that Jim Cramer thinks deserve attention.
In a recent episode of Mad Money, Jim Cramer advised investors to hold off on selling stocks, anticipating a rebound once the market’s downturn ended. This strategy proved effective as the average investor saw gains, with the Dow rising by 484 points or 1.16%, and the NASDAQ also climbing by 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
The previous week was challenging for economically sensitive stocks and tech stocks, despite the August employment report showing modest growth and a downward revision for July. The recent report seemed favorable for those hoping for Federal Reserve rate cuts, as it presented a balanced scenario of neither too strong nor too weak. Nonetheless, Wall Street reacted negatively, with investors moving away from cyclical stocks in favor of recession-proof sectors like consumer goods and pharmaceuticals. Industrials and semiconductors were particularly affected.
Jim Cramer observed that on Monday, recession-proof stocks such as pharmaceuticals, drug wholesalers, and medical devices continued to perform strongly. However, this trend is concerning as these stocks have surged significantly and might be due for a correction.
“Recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
According to Cramer, historically, when the Federal Reserve is about to cut rates, it’s a signal to shift investment strategies. With the Fed moving towards easing and a rate cut expected next week, Cramer suggests it’s time to reconsider holding recession-proof stocks. Instead, investors should look at more cyclical companies that could benefit from economic stimulation. While investing in cyclical stocks during a downturn can be challenging, anticipating a positive impact from the Fed’s rate cuts could make these stocks attractive.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
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A packed theater of moviegoers watching a blockbuster film produced by the entertainment company.
The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Investors: 92
Jim Cramer wondered if the reason The Walt Disney Company (NYSE:DIS)’s stock has been stuck at around $90 a share has just been revealed. The New York Times recently published an in-depth article about the power struggle at The Walt Disney Company (NYSE:DIS) that began when CEO Bob Iger returned to lead the company nearly two years ago, replacing his chosen successor, Bob Chapek.
“Did we just find out why Club holding Disney ’s stock has been stuck at $90 a share? The New York Times published a deep dive into the power struggle at Disney that ensued as CEO Bob Iger returned to the top job almost two years ago, replacing his chosen successor Bob Chapek.”
A positive outlook on The Walt Disney Company (NYSE:DIS) is backed by its successful recovery efforts under CEO Bob Iger, effective cost-cutting, and strategic investments in streaming and theme parks. In Q3 2024, The Walt Disney Company (NYSE:DIS)’s streaming services—Disney+, ESPN+, and Hulu—became profitable, exceeding expectations due to actions like cracking down on password sharing and improving user experience.
Disney+ continues to grow despite higher subscription prices, now reaching 277 million subscribers and set for more expansion into fiscal 2025. The Walt Disney Company (NYSE:DIS)’s cost-cutting efforts have surpassed their $7.5 billion savings target, enhancing efficiency and allowing for share buybacks, which shows strong financial health and a commitment to shareholders.
Although domestic theme park attendance has decreased, international parks and cruise lines are performing well. The Walt Disney Company (NYSE:DIS)’s $60 billion investment in its Experiences segment over the next decade reflects confidence in long-term growth. Analysts are optimistic about The Walt Disney Company (NYSE:DIS)’s future, with price targets ranging from $104 to $130, driven by its strong intellectual property and strategic sports streaming moves.
Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
Overall, DIS ranks 4th on our list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. While we acknowledge the potential of DIS, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.