Disney’s (Ticker Symbol: DIS) newest blockbuster hit “Toy Story 4” hit the box office this weekend with high praise from critics. The new movie, made by Pixar Studios, brought in a franchise-high of $118 million at the box office this past weekend. “Toy Story 4” fell just short of analysts’ expectations, which called for the movie to bring in closer to $150 million from its debut weekend. “Toy Story 4” had the third highest debut of 2019 behind “Captain Marvel” which brought in $153.4 million in March and “Avengers: Endgame” which beat all-time box office records with its $357.1 million debut in April.
The Toy Story franchise has been a great growth story for Disney and Pixar Studios. The domestic opening weekends for the franchise have been growing exponentially. The first “Toy Story” brought in $29.1 million in its opening weekend, “Toy Story 2” brought in $57.3 million. The third installment, “Toy Story 3”, brought it to the next level and grossed over $110 million, with “Toy Story 4” beating that number by $8 million this past weekend.
The start of 2018 was not the most eventful for shares of Disney’s stock. After nearly a 15% pullback to start the year, Disney began to find some support just under the $100 price level, before the stock began to firm up, led by strong earnings and positive guidance. In the second quarter of 2018, Disney’s stock broke out above its 2018 downtrend that began at the beginning of the year. It then found price support just above the 100 and 200-day Moving Averages and continued to rally into the second and third quarters on 2018. During that time, the stock began to top, forming a bearish divergence pattern, as indicated on the chart by the yellow arrows, where the stock makes a higher high in price but the Relative Strength Index makes a lower high. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Disney’s case.
Disney took a hard turn in the fourth quarter of 2018, pulling back almost 20% from the highs of the year and putting in its first oversold condition in the Relative Strength Index in over 15 months, indicated by the purple circles on the charts. Disney’s stock rebounded very well early in the first quarter of 2019, notched in a V-shaped reversal in March, and gapping over 20% higher on the news that the company will be launching its new Disney+ streaming service. Currently, Disney’s stock is sitting just under 3% from its all-time high of $143.51.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 18 analysts offering 12-month price targets, the average price target for Disney’s stock is $154.25. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $117.16.
Additionally, Disney’s “Aladdin” had the fourth-biggest opening in the U.S. with a $91.5 million. Disney has a history of releasing animated family movies near Father’s Day. Next year, Disney will be releasing its newest Pixar film, “Soul”, that is set to hit theaters on Father’s Day. Investors in the company should look to their next earnings release on August 8th for fresh news on the company.