, the place where dreams come true, currently appears to be a
dreamstock for traders. With an upbeat fundamental outlook,shares
appear on the verge of abullish technical breakout -- and could hit
a new all-time high.
The entertainment empire is on the rise following recent news
the company is releasing a new video game platform, called Disney
Infinity. The gaming system enables actual Disney figurines to be
docked into a video game console. Players can then customize the
game content based on the figures plugged in.
This interactive gaming system bears a remarkable similarity to
Activision Blizzard's (Nasdaq: ATVI)
Skylanders video game platform in that physical toys are used to
connect into a virtual game world. The "plug and play" idea appears
a profitable one. Activision recently reported U.S. sales of
Skylanders hit more than $500 million.
However, where Disneywill likely take the cake from Activision
is in its power to bring a much larger collection of characters
into the games. When the Infinity system is released in June, it
will be made available with three characters: Captain Jack Sparrow
from "Pirates of the Caribbean," Sulley from "Monster's University"
and Mr. Incredible from "The Incredibles." And an additional 17
figures will also be available for purchase.
Plus, as new movies and Disney products come out, they will
likely be accompanied by fresh Disney Infinity toy figures. The
possibilities really will be endless. And Disney can easily target
itsmarket by advertising the company's new gaming system through
its own TV channels.
It's important tonote , the Disney Infinity game system is being
released under the company's Interactive Division. This was the
only Disney division that didn't record aprofit in fiscal 2012. In
fact, the division has been unprofitable for the past 16
consecutivequarters , losing more than $1 billion since fiscal
2008. However, this new gaming system looks set to turn things
Industry analysts certainly appear optimistic. Due to the
expected success of the new video game platform,
Deutsche Bank (
projects sales in Disney's Interactive Division will increase more
than 20% in fiscal 2013.
The technicals support these bullish expectations.
In early October 2011, the stock hit a multi-month low near $28.
However, quickly recovering from this low, shares formed amajor
uptrend , surging to an all-time high of $53.40 by September
From there, the stock had trouble sustaining momentum. Shares
quickly dipped to a low of $45.83 in October, before finding
support at this level. In their fall, the major uptrend line was
bearishly broken and aminor downtrend line formed.
However, since hitting this low, the stock has been on a steady
climb. The minor downtrend line was bullishly broken, and aminor
uptrend line has since formed. During the last trading week in
2012, shares approached their all-time high, hitting slightly below
at $52.33. Disney is currently trading near this level -- and above
the minor uptrend line -- at around $52.40.
If the stock can sustain this momentum, then it could easily
challenge resistance, near the all-time $53.40 high. In this case,
a smallascending triangle pattern would be bullishly completed and
the stock could surge to a fresh all-time high.
According to themeasuring principle for a triangle -- calculated
by adding the height of the triangle to the breakout level -- the
stock could reach a newprice target of $60.97 ($53.40-$45.83 =
$7.57+$53.40 = $60.97). At current levels, this target represents
about 16% returns. However, with no historical resistance in sight,
shares could move much higher.
The bullish technical outlook is supported by strong
fundamentals. Upcoming quarterly results, to be reported Feb. 5,
appear solid. Analysts' projectrevenue for the period will ramp up
4.2% to $11.23 billion, from $10.78 billion in the comparable
year-ago period. Based, in part, on anticipated sales of the Disney
Infinity game system, analysts expect a 6.2% revenue gain in
full-year fiscal 2013, ended in September, with sales topping
$44.91 billion, compared with $42.28 billion last year.
Theearnings outlook is similar. Although upcoming quarterly
earnings are expected to dip slightly to 77 cents per share from 80
cents per share in the year-ago period, they are expected to rise
for the fullfiscal year . Due in part to expected demand for the
new gaming system, analysts' expect fiscal full-year 2013 earnings
will jump 11% to $3.41, from $3.07 in the prior year-ago period.
Additionally, the company offers an attractive forward
annualdividend of about 1.5%, or 75 cents per share.
Based on this upbeat fundamental outlook, supported by strong
technicals, I plan to go long Disney stock.
Risks to consider:
Disney's Interactive Division does not have a strong track
record. The division has accumulated more than $1 billion in losses
in the past four years. It's anticipated the new gaming system will
turn things around. But there's noguarantee . However, the similar
Activision system has been a hit with game players so far, and its
likely Disney's system will be equally, if not more popular.
Action to Take -->
Buy DIS on a break above $53.40 resistance. Set stop-loss at
$45.81, slightly below current support. Set initial price target at
$60.97 for a potential 14% gain by mid-2013.
This article originally appeared on ProfitableTrading.com:
Stock on the Verge of a Move That Could Land
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