Disney Stock Is a Buy — For Now

Disney (NYSE: DIS) stock has seen its share of slumps. That will happen when your company is more than 100 years old. But the post-pandemic crash was something like the drop off Splash Mountain. (Excuse me, Tiana’s Bayou Adventure.)

Disney stock shed 57% of its value from 2021–2023, plummeting from a peak of $190 per share to just $81. CEO Bob Chapek was the fall guy for that catastrophe, and rightfully so. But to be fair, he was put in a difficult position. 

Chapek took reins from a legendary CEO in Bob Iger in February 2020, and not even a month later the COVID pandemic shook the planet, shuttering Disney’s iconic parks. 

With Disney’s cash-cow amusement parks hampered by lockdowns, social distancing, and an anxious public, Chapek leaned into Disney’s television and movie businesses, ramping up production for the captive audience sitting at home.

Unfortunately, the gambit backfired. The flood of content was unprofitable. And the company’s streaming service, Disney+, failed to gain traction, posting an unseemly $4 billion loss in 2022.

With Disney in dire straits, Chapek was fired and Bob Iger brought back to implement a turnaround plan. 

The first part of that plan called for austerity, including thousands of layoffs, with the aim of cutting costs by $7.5 billion. 

The second part was a makeover that tabbed $60 billion to renovate Disney’s theme parks over 10 years.

And the third part was a renewed focus on quality over quantity. This last one is somewhat ironic because it was Iger who quadrupled Disney’s market cap with a raft of acquisitions, including Pixar, Marvel, Lucas Film, and 21st Century Fox, during his initial tenure. 

So if anyone is responsible for ramping up Disney’s output, it’s him. Nevertheless, Iger clearly has a better idea of what sells and his knack for cost-cutting is apparent.

The result has been undeniably positive. With a series of glowing earnings reports this year, it’s clear that the mouse has its swagger back. 

The latest came last week when Disney reported a 75% increase in net income, which rose to $460 million, or $0.25 per share, from $264 million, or $0.14 per share a year ago. Adjusting for one-time items, including restructuring and impairment charges, Disney reported earnings per share of $1.14, which still topped analysts’ estimates of $1.10.

Most importantly, though, revenue for Disney’s entertainment segment — which includes the movies, TV, and streaming — surged 14%, to $10.83 billion, turning a $1.1 billion profit.

And after five years of losses, Disney+ is now profitable, contributing to gains in streaming that are also being padded by Hulu and ESPN+. Subscribers to Disney+ increased by 4.4 million, or 4%, to 122.7 million in the third quarter, while Hulu saw its subscriber count grow 2%, to 52 million. 

The company is optimistic about the future, as well. Disney expects high-single-digit earnings growth for FY25 and double-digit EPS improvement through 2026 and 2027.

With that Disney stock has climbed back to $111 per share after a summer slump that dragged its price as low as $83.91. That’s a 30% surge in just three months.

So the fireworks are back above Cinderella’s castle for Disney. 

The question is… for how long?

Iger is nearing the end of the two-year contract he signed back in 2022 and a search committee is hunting for his successor as we speak. Whoever it is will need a better sense of quality than what Chapek had. 

They may also be faced with unforeseen challenges like pandemics, natural disasters, and labor disputes. Indeed, running the Disney kingdom is no easy task.

Heavy are the shoulders that don the red overalls. Nevertheless, things look good for Disney stock in the now.