Walt Disney‘s (DIS) theme parks are bustling again — following a long slow period during the pandemic. But it’s still betting a new return of its old management team can reinvigorate growth after Covid-19.
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The company narrowly missed Wall Street targets for fiscal second-quarter earnings and Disney+ subscribers. The stock is trying to stabilize after underperforming since Covid struck, former CEO was pushed out and the company got into political hot water with Florida. Florida is home to Disney’s largest theme park complex.
It’s been a wild ride on Wall Street since early 2020, as the stock market fell into a bear amid the coronavirus crash. Disney stock got slammed as the Dow Jones index company closed its theme parks and suspended Disney Cruise Line departures. Shares of Disney are up just 5% this year, lagging the Dow Jones Industrial Average.
Shift For Dow Jones Disney Stock
While its theme parks and cruise businesses got hit, the entertainment giant found success with its Disney+ streaming service. And slowly reopening movie theaters are boosting prospects for box-office sales. But it needs to find a balance between streaming and in-person revenue.
Disney’s content wins are stagnant down, too. For last year Disney films won 22 Oscar nominations. That includes “The Banshees of Inisherin,” “Black Panther: Wakanda Forever” and “Avatar: The Way of Water.” Theatrical releases, though, continue to struggle.
Is Disney stock is a buy right now? Read on to find out.
New CEO Takes The Helm
CEO Bob Iger, former CEO during an amazing run in the 2010, took over from Bob Chapek in November 2022. Iger has said he would stay on for another three years and promises to line up a successor this time.
Under Iger’s first 14-year-plus tenure, Disney stock soared more than 400%, or about 12% annualized. He revamped the theme parks, brought Star Wars, Marvel and Pixar into the company’s movie universe, and launched Disney+. It’s was a rough ride for Chapek, who failed to navigate the huge investment needed to keep people subscribing to Disney+, in addition to reopening parks and cruises. And he has the headache with Florida to deal with.
Disney+ Continues To Grow
After the May 10 close, Disney reported lower-than-expected fiscal Q2 earnings, as Disney+ streaming subscriptions came up weak. It earned adjusted earnings of 93 cents a share on revenue of $21.8 billion vs. S&P Global Market Intelligence forecasts for $0.93 on $21.8 billion.
Disney+ lost 2% of subscribers for a total of 157.8 million, missing views. The streaming service was a key revenue driver during the pandemic, as people are stuck at home due to Covid restrictions.
Analysts now see the stock, which has languished all year, to hit 124.82 in 12 months. That’s more than 30% potential upside.
Meantime, theme park revenue picked up. Disney Parks, Experiences and Products segment sales jumped 17% to $7.8 billion in Q2. But losses in the streaming business continue to hurt the business. Its expected to turn a profit in 2024.
Humble Beginnings
It’s hard to believe the $172 billion market cap behemoth started out in 1923 as Disney Brothers Cartoon Studio, by Walt and his brother, Roy O. Disney. Highlights along the way included Disney’s first sound film, “Steamboat Willie,” in 1928, its first feature-length animated film, “Snow white and the Seven Dwarfs” in 1937, and a foray into television in 1950.
In 1955, Walt’s theme park came into fruition as Disneyland in Anaheim. A second location in Orlando, Fla., was announced in 1965. The following year, Walt passed away, leaving Roy in charge. Walt Disney World opened in 1971, two months before Roy’s death. But the company kept growing.
Disney Stock Fundamentals — And Earnings
IBD Stock Checkup assigns Disney a 32 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 12th in the 20-stock Media-Diversified group, based on that rating.
A 28 Earnings Per Share Rating reflects a three-year earnings growth rate of 20%, which includes a 65% decline in fiscal ’20 and a 13% rise in fiscal ’21. Fiscal ’22 EPS rose 54%.
Analysts now expect EPS to jump 13.9% for the fiscal year ending in September 2023, followed by a 33% jump in fiscal ’24, according to S&P Global Market Intelligence. The company reports fiscal third-quarter results in August.
Is Disney Stock A Buy?
After breaking out from a flat base and rising to record highs in November 2019, Disney stock tumbled more than 40% during the coronavirus market crash. It found a bottom on March 18, 2020, before making its way back to fresh highs. But now it’s trying to find its footing.
Since then, Disney cleared several buy points en route to a March 8, 2021. It had been sinking in the months since and moved below its 50-day moving average.
The stock is now more than 26% off its 52-week high, according to IBD MarketSmith chart analysis.
The relative strength line, which compares a stock’s performance to the S&P 500, keeps heading sharply lower and hasn’t found a solid bottom. The recent rally petered out.
Disney is not a buy right now. It needs to first show significant improvement. It’s worth watching, though, to see how the media giant fares now that its theme parks, cruises and movie theaters are back in action. Wait for the stock to rise above its 200 day moving average of 100.99 before getting too bullish.
And don’t forget to keep an eye on the market’s action. You’ll want to wait until the market is in a confirmed uptrend, which means investors can buy leading stocks at proper buy points. Read The Big Picture for detailed daily analysis of what’s going on in the stock market.
Follow Matt Krantz on Twitter at @mattkrantz
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