The global media and streaming industry is evolving at lightning speed, with emerging contenders jockeying for position. Yet, in this tumultuous landscape, few names command the reverence and gravitas of the Walt Disney Company (DIS). Disney’s legacy spans a century, captivating audiences with timeless animated masterpieces and blockbuster franchises like Marvel and Star Wars.
While Disney often finds itself in the ring with Netflix (NFLX) in the cutthroat streaming content arena, its historical portfolio richness endows it with a competitive edge against industry newcomers. Despite mounting industry competition, Wall Street’s confidence in this legacy giant remains steadfast, adjudging it a “strong buy.”
Boasting a market capitalization of $206.5 billion, Disney’s stock has seen a robust 25% uptick year-to-date, outshining the 4.7% gain of the S&P 500 Index.
The Strategic Merits of Disney
Disney’s narrative is one of metamorphosis and progress. Through the years, the company has undergone a series of evolutions, diversifying its footprint across various entertainment segments.
Besides its unmatched intellectual property portfolio, encompassing Pixar, Marvel, and Star Wars, Disney’s business realm extends to Disney Experiences like theme parks, resorts, and cruises. This diversified mix has facilitated a steady influx of revenue over time.
In its most recent fiscal year’s first quarter, diluted earnings per share surged by an impressive 49% year-on-year to $1.04 per share. Total revenue remained level with the year-ago quarter at $23.5 billion.
Disney+ emerged in 2019 as the company’s foray into the fiercely competitive streaming market. Although Disney+ Core subscriptions dipped by 1.3 million in Q1, a projected addition of 5.5 million to 6 million subscribers in Q2 is on the horizon.
Management aims for the combined streaming business to turn profitable by the end of fiscal 2024’s fourth quarter through stringent cost-saving measures. By the fiscal year’s close, Disney anticipates aligning with or surpassing its annualized $7.5 billion cost savings goal.
In addition to cost reductions and profit-centric strategies, Disney remains committed to rewarding shareholders. Concluding the quarter with $886 million in free cash flow, the company maintained its dividend payouts.
Amidst this financial prudence, Disney hiked its quarterly dividend by 50% to $0.45 per share in Q1. With a payout ratio of 32% and a forward dividend yield of 1.6%, Disney holds the fort for possible future dividend increments. Furthermore, a $3 billion share repurchase is slated for fiscal 2024.
Looking forward into fiscal 2024, a 20% earnings growth is anticipated, reaching $4.60, slightly below the consensus estimate of $4.69. Analysts foresee a modest 3.3% revenue uptick to $91.8 billion in fiscal 2024, with fiscal 2025 heralding a 5.4% increase in revenue and a 17.5% boost in earnings.
Comparatively, analysts foresee Netflix’s revenue and earnings will ascend by 14.4% and 51.5%, correspondingly, in 2024.
The Analyst’s Verdict on Disney Stock
Following Disney’s commendable first-quarter performance, analysts are painting a rosy picture for the stock’s future. Raymond James analyst Ric Prentiss reiterated his “buy” rating, setting a price target of $112. Prentiss commended Disney’s Q1 results, showcasing the company’s adept transition from traditional TV to streaming dominance.
Similarly, Tigress Financial analyst Ivan Feinseth foresees a sunny outlook for Disney, citing the company’s robust financial position, diversified business arms, sturdy balance sheet, and escalating cash flows.
J.P. Morgan’s analyst David Karnovsky backed this sentiment by reiterating a “buy” rating on DIS, targeting $140, extolling Disney’s incomparable content, encouraging streaming financials, and resilient theme park operations.
Argus Research echoed these sentiments, upholding a “buy” rating with a $140 price target.
Collectively, Wall Street analysts resoundingly deem Disney stock a “strong buy.” Of the 27 analysts monitoring DIS, 18 champion it as a “strong buy,” four advocate a “moderate buy,” four hold it at “hold,” and one deems it a “strong sell.”
Analysts have united on the mean price target for Disney stock at $125.65, indicating an 11.6% climb beyond current levels. With the high target pegged at $145, the upside potential for Disney stands at almost 29% over the impending 12 months.
Presently, Disney stands as the more economical investment proposition, sporting a forward price-to-earnings (P/E) multiple of 24x, below Netflix’s 30x forward P/E.
The Takeaway on Disney Stock
Undoubtedly, Netflix has etched a swift and sturdy footprint in the entertainment domain, with analysts prophesying a meteoric climb in its earnings over the next couple of years. Nevertheless, rooted in Disney’s global legacy franchises, endearing brands, and diverse revenue streams lies the fortitude to weather storms and flourish in the long haul. Disney embodies a stock of resilience, furnishing investors with both expansion and steadiness.
