The global media and streaming industry is witnessing a rapid expansion, with numerous contenders vying for prominence. Amidst this competitive landscape, one stalwart shines brightly – the Walt Disney Company (DIS). With a legacy spanning over a century, Disney has captivated audiences with timeless animated classics and iconic franchises like Marvel and Star Wars.
Often pitted against Netflix (NFLX), Disney’s heritage portfolio sets it apart from new players in the streaming content arena. Despite intensifying competition, Wall Street’s sentiment towards this industry veteran remains bullish, holding it in high regard with a “strong buy” rating.
Boasting a market value of $206.5 billion, Disney stock has surged by 25% year-to-date, surpassing the S&P 500 Index’s gain of 4.7%.
The Resilience of Disney
Disney’s narrative epitomizes adaptability and innovation, with a history of transformative changes that have propelled the company into various segments of the entertainment realm.
Augmented by an unparalleled intellectual property (IP) portfolio encompassing Pixar, Marvel, and Star Wars, Disney’s revenue streams extend to Disney Experiences like theme parks, resorts, and cruises. This diversified business model has enabled the company to yield consistent income over time.
In the most recent quarter of fiscal 2024, diluted earnings per share (EPS) surged by a remarkable 49% year-on-year to $1.04 per share. Total revenue remained steady at $23.5 billion compared to the prior year’s quarter.
Disney+, launched in 2019, signifies the company’s foray into the fiercely competitive streaming market. Despite a 1.3 million decline in Disney+ Core subscriptions in Q1, the company anticipates adding 5.5 million to 6 million subscribers in Q2.
Embracing streamlining initiatives, Disney aims to achieve profitability in its combined streaming operations by the fourth quarter of fiscal 2024. They are on track to meet or exceed their target of $7.5 billion in annualized cost savings by the end of fiscal 2024.
Additionally, alongside cost reductions and profitability focus, Disney remains committed to rewarding shareholders. Ending the quarter with $886 million in free cash flow, they enhanced their quarterly dividend by 50% to $0.45 per share in Q1, offering a generous forward dividend yield of 1.6%.
Looking ahead, management anticipates a 20% earnings growth to $4.60 in fiscal 2024, slightly below the consensus estimate of $4.69. Analysts project a modest 3.3% revenue uptick to $91.8 billion in the same period, with further revenue and earnings growth forecasted for fiscal 2025.
Comparatively, analysts foresee Netflix’s revenue and earnings to surge by 14.4% and 51.5%, respectively, in 2024.
Analyst Insights on Disney Stock
Following Disney’s robust first-quarter performance, analysts express optimism towards the stock. Raymond James analyst Ric Prentiss reaffirmed a “buy” rating with a price target of $112, commending Disney’s transition from traditional TV to a streaming powerhouse.
Tigress Financial analyst Ivan Feinseth echoes a positive sentiment, highlighting Disney’s financial strength, diverse business segments, strong balance sheet, and accelerating cash flow as pillars supporting a promising future for the company.
J.P. Morgan analyst David Karnovsky upheld a “buy” rating on DIS with a price target of $140, lauding Disney’s unmatched content, promising streaming services, and robust theme park operations.
Argus Research also maintains a “buy” rating with a $140 price target, aligning with the overall bullish sentiment on Wall Street with 18 analysts recommending Disney as a “strong buy.”
Analysts have set a mean price target for Disney stock at $125.65, indicating an 11.6% potential upside. With a high target price of $145, the stock presents a nearly 29% upside over the next 12 months.
At present, Disney emerges as an appealing investment choice with a forward price-to-earnings (P/E) multiple of 24x, lower than Netflix’s 30x forward P/E.
The Verdict: Disney’s Path Forward
While Netflix blazes a trail in the entertainment sector, Disney’s rich legacy of global brands and diversified revenue streams positions it for long-term survival and success. Investors looking for growth coupled with stability may find Disney stock a resilient choice in the dynamic market environment.