Disney (NYSE:DIS), once considered a reliable investment, faced numerous challenges in recent years, causing setbacks for hopeful investors. Despite a 4% increase this year after positive earnings, the stock remains down 53% from its peak. The stock hit a recent low below $80 per share in October, providing plenty of concern for this previously high-flying stock.
Given these factors and the current valuation investors have pegged Disney at, all may not look to be right at the House of Mouse. However, there are plenty of reasons to be bullish, and I will highlight some of them below.
So, what makes DIS stock a buy? Or is it even a good buy for investors? Here’s what investors ought to consider.
Excellent Earnings
On November 8, Disney surpassed earnings predictions and revised its cost-cutting goals. Reporting adjusted earnings of 82 cents per share, a 173% surge from the previous year, and a 5% revenue increase to $21.24 billion, the results exceeded FactSet’s projected 71 cents per share but slightly missed the anticipated $21.37 billion in sales. The positive performance led to an early November 9 rally in Disney stock.
Disney’s experiences segment revenue rose 13% to $8.16 billion, beating estimates of $8.15 billion. Disney+ streaming hit 150.2 million subscribers, surpassing forecasts of 148.7 million. Overall, direct-to-consumer revenue increased 12% to $5.04 billion. CEO Bob Iger highlighted Disney’s progress toward achieving $7.5 billion in cost reductions, up from the initial target of $5.5 billion.
Investors Are Highly Confident About DIS Stock
Disney’s enchantment is crafted by its stellar creative team, employing a successful model. Despite occasional failures, its films, franchises, and characters resonate with fans, spawning more content, products, and theme park attractions. Disney+ strengthened this strategy, emerging as a leading streaming player and gaining 7 million subscribers in Q4 of fiscal year 2023.
Streaming through Disney+, Hulu, and ESPN+ has become integral to Disney’s model, aligning with industry leader Netflix (NASDAQ:NFLX). CEO Bob Iger’s $60 billion investment in parks over the next decade bolsters this success, with robust attendance enhancing the experiential aspect of Disney’s ecosystem fostering fan loyalty.
Bob Iger Knows What He’s Doing
In an internal town hall, Disney CEO Bob Iger expressed eagerness to shift from fixing to building in 2024. Joined by key executives, he discussed future plans and emphasized the excitement of creating.
Disney, amid 7,000 job cuts and cost-cutting measures in 2023, looks to a new era under CEO Bob Iger’s leadership. With a $60 billion commitment, the focus is on theme park expansion, a 2025 ESPN streaming platform, and revitalizing the movie studio business.
Iger and Pitaro wanted to introduce an enhanced ESPN streaming service, incorporating advanced statistics and fantasy sports integration. Pitaro is researching the costs and optimal launch timing for a more impactful platform, emphasizing substantial product enhancements.
Iger highlighted the joy a series of successful films brings to Disney, enhancing the brand and creating synergies across the business. Disney shares have seen a 6.8% increase this year, and Iger remains optimistic about the company’s building prospects in 2024.
However, the potential for greater investor reward may hinge on more significant changes, such as divesting declining linear businesses or seeking strategic partnerships for ESPN. Iger is still contemplating these options without a final decision on the way forward.
Believe in DIS’ Magic
Disney faced challenges not only with Disney+ losses but also as cord-cutting redirected ad dollars from traditional TV. The fate of ABC network and part of ESPN was uncertain, prompting anticipation for resolution in the coming year. Investors, trusting Iger’s expertise, hoped for a stronger Disney, though challenges could persist into the future– or not.
Disney faced film delays due to union strikes, impacting short-term revenue. The summer film list underperformed, raising concerns about its creative model. While worth monitoring, one season’s results shouldn’t prompt excessive worry.
So, Is DIS Stock a Buy?
Overall, I think Disney’s long-term outlook is better than the company’s near-term prospects. That said, plenty of headwinds remain, and those have largely been factored into the price. Thus, I think this stock is a hold for investors looking to hold for a few months or less than a year.
Until we all grow tired of Disney movies, theme parks, and entertainment, this company is bound to wow generations to come. That’s what it’s been doing for the past century, and there’s no reason to suggest that will change over the next decade or two. So, it is a buy for those who wish to hold for the long term.
On the date of publication, Chris MacDonald has a LONG position in DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
