The Walt Disney Company (NYSE:DIS) started as a small animation studio, but in the century that followed, it expanded to become one of the world’s largest and most successful entertainment conglomerates.
It owns globally recognized brands like Disney, Pixar, Marvel, and 20th Century Studios, in addition to favorite characters, films, and theme parks.
In its 100 years of innovation, Disney has pioneered advanced technology, best-in-class hospitality, and creative customer engagement. It’s the company every other entertainment brand tries to replicate.
When consumers moved away from traditional media like television and cable, Disney quickly met changing tastes. Disney acquired a stake in streaming giant Hulu, and it now owns ESPN and offers streaming content through ESPN+. In 2019, Disney launched Disney+, which immediately rose to a market leadership position.
Disney has indeed seen challenges in recent years. A variety of external factors, including the 2020-21 era, disrupted business units centered on experiences and hospitality. However, Disney stock is starting to look attractive from a valuation perspective investors are asking whether it is the right time to buy Disney stock to support their long-term wealth-building strategy.
How Is Disney’s Streaming Business Performing?
When Disney introduced its branded streaming service, Disney+, a small but vocal group of critics said the platform couldn’t compete with Netflix. But those critics were quickly proven wrong.
Disney owns some of the most sought-after entertainment assets in the industry, including classic animated and live-action programming from Pixar, Marvel, Star Wars, and National Geographic.
It gathered these collections onto the streaming service, then added new content to expand stories from some of the most famous fictional universes ever to make it on-screen.
Other entertainment companies simply can’t match Disney’s selection, which consists of content created over 100 years of production and a library of acquired assets.
The total number of live-action films available through Disney tops 5,100, and the company owns more than 400 animated works.
On top of that, Disney has a number of episodic series that keep consumers of all ages coming back for more, and it is investing in new, exclusive content. Nearly 100 series and 65 films were produced for initial distribution through DTC platforms.
The company aims to create or commission approximately 225 episodic and feature film titles in fiscal 2024, and Disney+ will be home to “Inside Out 2” – the highest-grossing film of 2024 with more than $1 billion in global box office sales to date.
In addition to Disney+, the Walt Disney Company is finding success through the operation of its other streaming services. For example, Hulu and ESPN+ target a separate set of demographics through different content genres.
Hulu offers a wide assortment of classic and new television shows, a long list of movies, and original content. ESPN+ is a dedicated sports streaming service that includes live events, documentaries, and sports-specific shows. Customers often subscribe to all three so they can enjoy promotional low-cost bundling.
Disney’s investment in streaming services has been a source of fresh revenue and a contributing factor to its sustained competitive edge. Through Disney+, Hulu, and ESPN+, the Walt Disney Company has avoided some of the challenges facing traditional media organizations, such as declining cable subscriptions.
The expansion of streaming platforms has made Disney an incredibly competitive player in the entertainment industry, equivalent to Netflix or Amazon Video. Since Disney constantly creates more original material and expands the number of streaming titles available, industry experts expect continued success.
In short, Disney+ has demonstrated that the larger Walt Disney Company will continue to shift and evolve as it grows to meet changing consumer habits.
Will Theme Parks Contribute to Long-Term Growth?
Disney+ has created a new opportunity for the Walt Disney Company, but that hasn’t distracted from Disney’s traditional business units.
The company has continued to invest in its theme parks, and the related expansion plan is expected to contribute significantly to the overall growth strategy.
Disney sustained tremendous losses during the 2020-21 park closures, but that challenge proved temporary. More recently, the company has recorded significant increases in park-related revenues, and business leaders predict that continued investment in new attractions and experiences will sustain and amplify this trend.
Disney plans to improve the guest experience through a variety of innovations, and it is taking steps to accommodate more guests. This is good for the park segment of the business, as well as the overall brand.
How Is Disney’s Financial Performance?
On the financial side, Disney’s fundamentals are solid – likely a result of the company’s diverse business portfolio and positive image.
The distinctive mix of products keeps revenues stable, regardless of external factors, and the power of the Disney name inspires lifelong consumer loyalty that spans nearly all demographics on a global scale.
Disney reported a respectable $22.1 billion in revenue for Q2 2024 – a slight improvement over the $21.8 billion generated in Q2 2023. Adjusted EPS increased an impressive 30 percent year-over-year to $1.21.
US parks and experiences revenue rose seven percent to $5.96 billion – a reasonable gain given current economic conditions – and international sales went up by 29% to $1.52 billion, which is remarkable.
Management suggested these notable gains are due to higher park attendance, increased spending by visitors, and the launch of new attractions and experiences.
Within the entertainment segment, linear networks experienced a disappointing 8% decline in revenue. The total came in at just $2.77 billion.
However, this was offset by the Direct-to-Consumer segment, which saw a considerable 13% increase in revenue to $5.64 billion. Disney’s TV business continued to lag, along with other networks, as millions of Americans joined the movement to “cut the [cable] cord.”
These results demonstrate the effectiveness of Disney’s diversification. The company has been able to depend on the appeal of its theme parks and the compelling nature of its streaming programs to bring in revenue, though there have been challenges on the media broadcasting side.
The Disney+ service and the reopening of the parks after the pandemic ensured stable revenues for the second quarter of 2024.
Is Disney a Good Stock To Hold?
Disney stock is still considered good as a long-term hold because of the company’s diversified business model, virtually indestructible brand, sought-after theme parks, and the success and future potential of the streaming services collection.
Of the 25 analysts covering Disney stock, a whopping 17 have rated it as a Buy. The median price target indicates an appreciable potential upside of 25% over the next year.
Disney stock is currently trading at 20.73x forward non-GAAP earnings, which is a little higher than the industry median, but this is a relative discount when compared to the five-year average.
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