Why Jim Cramer Is Adding To His Disney Stock Position

Walt Disney Co DIS has been trending lower since announcing worse-than-expected fiscal fourth-quarter financial results last week.

What Happened: Disney reported quarterly adjusted earnings of 37 cents, which came in below the estimate of 44 cents. The company reported quarterly revenue of $18.53 billion, which beat the estimate of $16.26 billion.

Disney+ paid subscribers totaled 118.1 million, up from 73.7 million year-over-year. 

Related Link: Walt Disney Company Q4 Highlights: 118.1M Disney+ Subs, Lower ARPU, Parks & Resort Segment Up 99%

Why It Matters: Jim Cramer announced plans to buy 100 shares of Disney for around $159 per share Tuesday in a letter to members of CNBC's "Investing Club."

"We expect shares to consolidate around current levels given that the company missed estimates with its most recent earnings release. But we are sticking with the name because we believe the worst is behind us and the future is bright for the House of Mouse," Cramer said.

Cramer cited two reasons for his positive outlook: streaming content ramping up and international expansion, as well as a rebound in Disney's parks business.

The recurring revenue and increased operating leverage of DIsney+ allow Disney to trade at a higher valuation multiple, according to Cramer.

He noted that he thinks the recovery in parks and experiences is being underappreciated by the market.

"Moreover, after being cooped up for so long, we think these parks will prove an experiential entertainment haven that consumers will flock to – especially in the U.S."

Cramer expects the stock to return to and exceed all-time highs "by management’s increased focus on creating a flywheel around the company’s world class content."

DIS Price Action: Disney has traded as high as $203.02 and as low as $136.52 over a 52-week period.

The stock was up 0.35% at $158.98 at time of publication.

Photo: brunapazini0 from Pixabay.