For over a century, Disney (DIS) has defined global entertainment, from animation to theme parks. Despite owning iconic brands and producing the top three 2024 box office hits, its stock struggles. Declining cable subscribers, direct-to-consumer (DTC) streaming losses, 2023 box office flops, costly sports rights, and leadership turmoil have weighed heavily, leaving investors wary despite the company’s cultural dominance.
Moreover, Disney’s most recent quarterly report revealed ongoing struggles. Its DTC streaming operating losses over the past few years have squeezed overall profitability. This month, the stock dipped to a yearly low, last seen in November 2024. Yet, its vast intellectual property empire – spanning films, TV, theme parks, cruises, and merchandise – remains a revenue powerhouse, keeping the company’s long-term potential intact despite short-term financial turbulence.
With the stock at historic lows, is this a buy-the-dip opportunity for investors or a red flag?
About Disney Stock
Disney (DIS) is powerhouse in global entertainment, with a market capitalization of $179 billion. Its empire spans world-famous theme parks and resorts, industry-defining film studios, dominant media networks, and an ever-expanding streaming business through Disney+, ESPN+, and Hulu.
Despite its stature, DIS is struggling to find its magic. Currently sitting 20% below its 52-week high of $123.74, the stock declined 14% over the past 52 weeks and has fallen 11% on a YTD basis.
From a valuation standpoint, DIS stock carries a premium, priced at 18 times forward earnings and 1.96 times sales.
Disney Surpasses Q1 Earnings Estimates
The House of Mouse posted a strong fiscal first-quarter 2025 performance on Feb. 5, exceeding Wall Street forecasts on both top and bottom lines. Revenue climbed 4.8% year over year to $24.7 billion, while adjusted EPS surged 44.3% annually to $1.76, beating the forecast by 22.2%.
Disney’s DTC segment stole the show, growing revenue by 9% to $6.1 billion. Although Disney+ subscribers declined 1% to 124.6 million, it managed to increase its average revenue per user (ARPU) by 5%, rising to $7.55. The DTC segment, which includes Hulu, pulled off a dramatic turnaround, flipping a $138 million loss from last year into a $293 million profit in Q1.
Overall, operating income surged 30.5% annually to $5.1 billion, while cash provided by operations rocketed 46.7% to $3.2 billion. With $5.5 billion in cash and cash equivalents as of Dec. 28, 2024, Disney’s financial fortress remains strong.
Looking forward, Disney remains positioned for growth. Its upcoming theatrical slate aims to build on 2024’s dominance when it released the world’s three highest-grossing films. In addition, Disneyland’s 70th-anniversary celebrations, beginning in May, could boost theme park momentum. A profitable Disney+ could expand long-term opportunities, while the Sports segment targets double-digit operating income growth.
For fiscal 2025, management has reaffirmed its forecast for high-single-digit adjusted EPS growth, aligning with the 8.8% consensus estimate. It anticipates double-digit operating income growth for its Entertainment segment, 13% for Sports, and 6% to 8% for Experiences.
Analysts tracking Disney predict EPS growth of 10.3% year-over-year to $5.48 for fiscal 2025 before surging by another 11.7% annually to $6.12 in fiscal 2026.
What Do Analysts Expect for Disney Stock?
Multiple analysts have adjusted their price targets for the entertainment powerhouse. Loop Capital analyst Alan Gould has lifted his DIS price target from $125 to $130, maintaining a “Buy” rating. The analyst expressed optimism regarding Disney’s future despite initial mixed reactions to the high-budget film Snow White. He anticipates potential upward revisions in guidance and estimates, buoyed by accelerating direct-to-video profits that offset declines in linear TV earnings.
Overall, Wall Street remains bullish, assigning DIS a consensus rating of “Strong Buy.” Among 29 analysts covering the stock, 20 endorse it as a “Strong Buy,” two favor a “Moderate Buy,” and seven analysts are cautious, advising “Hold.”
The stock’s average analyst price target of $128.88 represents potential upside of 28%. The street-high target of $147 implies DIS could surge up to 47% from current levels.
