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Is Disney (DIS) Stock Worth Buying for Investors in 2024?
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Disney (DIS - Free Report) has long been considered a blue-chip stock and a core holding for many investors. With its world-famous brand and beloved intellectual properties spanning movies, TV shows, theme parks and merchandise, Disney has a unique ability to bring joy to millions worldwide. However, the company has faced significant headwinds in recent years, leading some to question if the House of Mouse still holds the same investment allure in 2024.
Parks, Experiences and Products Business: Back in Full Swing
Disney's theme parks faced extended pandemic-related closures and capacity restrictions, weighing heavily on this highly profitable division. However, with parks fully reopened, pent-up demand could drive a surge in visitors and spending in the rest of 2024. It has new rides and immersive experiences set to open at parks worldwide, providing further upside potential.
Disney continues to expect robust operating income growth at Experiences for the full year. At the Walt Disney World Resort, DIS has been witnessing increased guest spending attributable to higher average ticket prices.
It is benefiting from growth at Disney Cruise Line due to an increase in average ticket prices. Recent growth in sales from Hong Kong Disneyland Resort is attributable to guest spending growth due to improvements in average ticket prices and food, beverage and merchandise spending. This trend is expected to continue for the rest of 2024.
Disney's majority (85%) ownership stake in sports betting company BamTech holds promise. As legalized sports gambling rapidly expands across the United States, BamTech's pure play exposure is expected to eventually unlock significant value for Disney.
Disney is doubling down on its streaming strategy with a reorganized structure and renewed content push. The platform continues expanding its content library with must-see shows and movies like the Star Wars and Marvel franchises that have proven popular.
Disney+, as of Mar 31, 2024, had 117.6 million paid subscribers compared with 111.3 million as of Dec 31, 2023.
If Disney can reignite meaningful subscriber growth, it could provide a substantial tailwind. The company does not expect to see core subscriber growth at Disney+ in the fiscal third quarter but anticipates improvements in the fiscal fourth quarter. It continues to expect the combined streaming businesses to reach profitability in the fourth quarter of fiscal 2024.
Streaming Wars and Box Office Blues
While Disney+ got off to a blistering start in signing up subscribers, growth has slowed over the past year amid stiff competition and subscriber fatigue. The competition in the streaming landscape has intensified, with deep-pocketed rivals like Netflix, Amazon Prime Video, and others vying for market share. Escalating content costs and the need for constant high-quality programming have put pressure on Disney's bottom line.
Disney's legendary film studio has also faced challenges in recent years. While blockbusters like Guardians of the Galaxy: Vol 3, Inside Out 2 and Kingdom of the Planet of the Apes have performed well; the company has also had its share of disappointing releases with titles including The Marvels, Wish, Ant-Man and the Wasp: Quantumania and Elemental.
The rise of streaming services and the changing landscape of content consumption have raised questions about the future of traditional movie-going experiences. In the second quarter of fiscal 2024, Content Sales/Licensing and Other operating losses were $18 million against an operating income of $83 million reported in the year-ago quarter.
Valuation and Growth Prospects
Despite these challenges, Disney remains a diversified media and entertainment powerhouse with a strong brand and valuable intellectual property. Its theme parks and resorts continue to be a significant revenue driver, and the potential for growth in emerging markets of Asia remains promising.
Disney's focus on expanding its direct-to-consumer streaming offerings, including the ad-supported tier for Disney+, could provide new revenue streams and growth opportunities.
The Zacks Consensus Estimate for fiscal 2024 revenues is currently pegged at $91.15 billion, indicating 2.54% year-over-year growth. The consensus mark for fiscal 2024 earnings has moved north by 0.6% to $4.76 per share over the past 30 days, indicating 26.6% growth from the year-ago period.
However, Disney is trading at a premium with a forward 12-month P/E of 19.06X compared with the Zacks Media Conglomerates industry’s 17.16X, reflecting a stretched valuation.
Disney’s debt balance of $39.51 billion compares unfavorably with cash, cash equivalents and its current marketable investment securities balance of $6.635 billion.
Risk-averse investors or those with a shorter investment horizon may want to exercise caution and wait for a better entry point, given the uncertainties surrounding the company's future growth prospects and the competitive pressures it faces despite the enduring power of Disney's brand.
Image: Bigstock
Is Disney (DIS) Stock Worth Buying for Investors in 2024?
Disney (DIS - Free Report) has long been considered a blue-chip stock and a core holding for many investors. With its world-famous brand and beloved intellectual properties spanning movies, TV shows, theme parks and merchandise, Disney has a unique ability to bring joy to millions worldwide. However, the company has faced significant headwinds in recent years, leading some to question if the House of Mouse still holds the same investment allure in 2024.
Parks, Experiences and Products Business: Back in Full Swing
Disney's theme parks faced extended pandemic-related closures and capacity restrictions, weighing heavily on this highly profitable division. However, with parks fully reopened, pent-up demand could drive a surge in visitors and spending in the rest of 2024. It has new rides and immersive experiences set to open at parks worldwide, providing further upside potential.
Disney continues to expect robust operating income growth at Experiences for the full year. At the Walt Disney World Resort, DIS has been witnessing increased guest spending attributable to higher average ticket prices.
It is benefiting from growth at Disney Cruise Line due to an increase in average ticket prices. Recent growth in sales from Hong Kong Disneyland Resort is attributable to guest spending growth due to improvements in average ticket prices and food, beverage and merchandise spending. This trend is expected to continue for the rest of 2024.
Disney's majority (85%) ownership stake in sports betting company BamTech holds promise. As legalized sports gambling rapidly expands across the United States, BamTech's pure play exposure is expected to eventually unlock significant value for Disney.
The Walt Disney Company Price and Consensus
The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote
Streaming Subscriber Growth Showing Promise
Disney is doubling down on its streaming strategy with a reorganized structure and renewed content push. The platform continues expanding its content library with must-see shows and movies like the Star Wars and Marvel franchises that have proven popular.
Disney+, as of Mar 31, 2024, had 117.6 million paid subscribers compared with 111.3 million as of Dec 31, 2023.
If Disney can reignite meaningful subscriber growth, it could provide a substantial tailwind. The company does not expect to see core subscriber growth at Disney+ in the fiscal third quarter but anticipates improvements in the fiscal fourth quarter. It continues to expect the combined streaming businesses to reach profitability in the fourth quarter of fiscal 2024.
Streaming Wars and Box Office Blues
While Disney+ got off to a blistering start in signing up subscribers, growth has slowed over the past year amid stiff competition and subscriber fatigue. The competition in the streaming landscape has intensified, with deep-pocketed rivals like Netflix, Amazon Prime Video, and others vying for market share. Escalating content costs and the need for constant high-quality programming have put pressure on Disney's bottom line.
Disney's legendary film studio has also faced challenges in recent years. While blockbusters like Guardians of the Galaxy: Vol 3, Inside Out 2 and Kingdom of the Planet of the Apes have performed well; the company has also had its share of disappointing releases with titles including The Marvels, Wish, Ant-Man and the Wasp: Quantumania and Elemental.
The rise of streaming services and the changing landscape of content consumption have raised questions about the future of traditional movie-going experiences. In the second quarter of fiscal 2024, Content Sales/Licensing and Other operating losses were $18 million against an operating income of $83 million reported in the year-ago quarter.
Valuation and Growth Prospects
Despite these challenges, Disney remains a diversified media and entertainment powerhouse with a strong brand and valuable intellectual property. Its theme parks and resorts continue to be a significant revenue driver, and the potential for growth in emerging markets of Asia remains promising.
Disney's focus on expanding its direct-to-consumer streaming offerings, including the ad-supported tier for Disney+, could provide new revenue streams and growth opportunities.
The Zacks Consensus Estimate for fiscal 2024 revenues is currently pegged at $91.15 billion, indicating 2.54% year-over-year growth. The consensus mark for fiscal 2024 earnings has moved north by 0.6% to $4.76 per share over the past 30 days, indicating 26.6% growth from the year-ago period.
However, Disney is trading at a premium with a forward 12-month P/E of 19.06X compared with the Zacks Media Conglomerates industry’s 17.16X, reflecting a stretched valuation.
Disney’s debt balance of $39.51 billion compares unfavorably with cash, cash equivalents and its current marketable investment securities balance of $6.635 billion.
Risk-averse investors or those with a shorter investment horizon may want to exercise caution and wait for a better entry point, given the uncertainties surrounding the company's future growth prospects and the competitive pressures it faces despite the enduring power of Disney's brand.
Disney currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.