Your portfolios in brief
Despite a difficult year, Disney’s stock continues to be a cheap one for our portfolio. The company released its quarterly results this week showing an increase in its subscribers, becoming an increasingly serious competitor for Netflix. Indeed, rapid subscriber growth is strengthening Disney’s position in the increasingly saturated streaming space as the platform has added more new customers than expected.
Despite Disney theme park closures, including Hurricane Ian and COVID-19 travel restrictions, the theme parks posted robust growth, recording $7.4 billion in revenue during the the quarter, beating analysts’ forecasts. Operating profit reached $1.5 billion, more than double from a year ago.
The company’s forecasts for the next quarters are interesting, particularly because on December 8 the Disney + platform will offer in the United States, a new subscription with advertising, for 7.99 dollars per month, while the basic subscription without advertising will drop to $10.99. The company also estimates that its parks will be increasingly profitable as tourism is up and is expected to reach pre-pandemic rates by 2024.
“In short, despite its recent decline, Disney’s stock remains cheap, and by being patient, this stock is likely to offer us the long-awaited recovery in the upcoming quarters. The increase in subscribers of digital services combined with an increase in monthly subscription prices as well as a decrease in investments should ensure that the digital division finds its profitability sooner than later,” estimates our president and portfolio manager, Philippe Pratte. “On the park’s side, Ian’s impact was reflected in the decline in quarterly revenue, but revenue remains the economic engine of the company. The big question right now remains whether a change of the guard at the executive level is to be expected,” adds Philippe Pratte.
Market Brief
The midterm elections were eagerly awaited by investors who did not seem nervous at the start of the week as the markets ended Monday and Tuesday sessions higher. Usually, the markets are content when the Republican Party is in power as they are recognized as the champions of free enterprise.
This good performance at the beginning of the week is “also to do with the fact that the market has traditionally behaved well in the twelve months following the midterm elections,” according to Patrick O’Hare of Briefing.com. Indeed, historically, the markets have accumulated an average gain of 14.5% over these periods since 1950.
Analysts were awaiting Thursday morning consumer price index data, which came in better than expected. Indeed, the index rose just 0.4% for the month and 7.7% from a year ago, its lowest annual increase since January. Economists expected increases of 0.6% and 7.9%.
“This is exactly the moment we’ve been waiting for as bond rates are falling rapidly. The next step to have full confidence in the market will be a normalization of the two- and ten-year bond curve, which would signal the longevity of the rebound,” believes Philippe Pratte. “This drop in short-term inflation confirms that interest rate hikes are indeed having the impact the Fed hopes for and they could possibly take a slight break during the next meetings to take the time to properly measure the real impact of higher rates on the economy,” he added.
Markets rebounded Thursday at the open, getting excited about the encouraging inflation data. The three major indexes posted their best rally since 2020; the S&P 500 jumped 5.5%, the Dow Jones rose 3.7% to 33,715 points and the NASDAQ jumped 7.4%, a record session.
Here is the average for the week of the three main indexes at 1 p.m. Friday.
And here's the average for the week for the TSX in Canada.
Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
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