The global media and streaming sector is experiencing rapid expansion, with numerous newcomers vying for prominence. However, few contenders carry the weight and enduring legacy of the Walt Disney Company (NYSE:DIS). With a century-long popularity fueled by timeless animated classics and blockbuster franchises like Marvel and Star Wars, Disney stands as a formidable force in the industry.
Often pitted against Netflix (NASDAQ:NFLX) due to its fierce competition in the streaming content domain, Disney’s extensive legacy portfolio offers it a distinct advantage over emerging rivals. Despite heightened competition, Wall Street maintains an optimistic outlook on this established player, rating it a “strong buy.”
Valued at $206.5 billion, Disney’s stock has surged by 25% year-to-date, outperforming the S&P 500 Index’s 4.7% gain.
The Bull Case For Disney
Disney’s narrative is one of adaptation and evolution, evident through its numerous transformations and expansions across various entertainment segments. Beyond its unparalleled intellectual property portfolio encompassing Pixar, Marvel, and Star Wars, Disney’s businesses extend to Disney Experiences, including theme parks, resorts, and cruises. This diversified portfolio has consistently generated stable income over time.
In the most recent first quarter of fiscal 2024, Disney reported a remarkable 49% year-on-year increase in diluted earnings per share (EPS) to $1.04, with total revenue aligning with the year-ago quarter at $23.5 billion.
Disney+—launched in 2019—represents the company’s foray into the fiercely competitive streaming market. Despite a slight decline of 1.3 million in Disney+ Core subscriptions in Q1, the company anticipates adding 5.5 million to 6 million subscribers in Q2.
Management aims to achieve profitability in its combined streaming business by the fourth quarter of fiscal 2024 through cost-cutting initiatives, targeting to meet or exceed its annualized cost savings target of $7.5 billion by the fiscal year’s end.
Moreover, alongside cost reduction efforts and profitability focus, Disney remains committed to shareholder returns. Ending the quarter with $886 million in free cash flow, Disney enhanced its quarterly dividend by 50% to $0.45 per share in Q1. With a forward dividend yield of 1.6% and a payout ratio of 32%, the company leaves ample room for future dividend increases while targeting $3 billion in share repurchases in fiscal 2024.
Looking ahead to fiscal 2024, management anticipates earnings growth of 20% to $4.60, compared to the consensus estimate of $4.69, with analysts projecting a modest 3.3% increase in revenue to $91.8 billion. Analysts further forecast a 5.4% revenue increase and a 17.5% earnings rise in fiscal 2025.
Comparatively, analysts expect Netflix’s revenue and earnings to increase by 14.4% and 51.5%, respectively, in 2024.
Is Disney Stock A Buy Now
Following Disney’s robust first-quarter results, analysts express optimism about the stock’s prospects. Raymond James analyst Ric Prentiss reiterates his “buy” rating with a price target of $112, emphasizing Disney’s transition from a traditional TV business to a streaming powerhouse.
Tigress Financial analyst Ivan Feinseth also holds a positive outlook, citing Disney’s ongoing financial strength, business segment diversity, robust balance sheet, and accelerating cash flow.
J.P. Morgan analyst David Karnovsky maintains a “buy” rating on DIS with a price target of $140, highlighting Disney’s unparalleled content, promising streaming service financials, and robust theme park operations.
Argus Research also upholds a “buy” rating with a $140 price target.
Overall, Wall Street analysts collectively rate Disney stock as a “strong buy.” Of the 27 analysts covering DIS, 18 recommend it as a “strong buy,” four suggest a “moderate buy,” four rate it a “hold,” and one recommends a “strong sell.”
Analysts set a mean price target for Disney stock at $125.65, representing an 11.6% increase from current levels. The high target price of $145 indicates a nearly 29% upside potential over the next 12 months.
Disney also presents a more attractively valued investment option compared to Netflix, with a forward price-to-earnings (P/E) multiple of 24x, lower than Netflix’s forward P/E of 30x.
Conclusion
While Netflix has swiftly entrenched itself in the entertainment industry, analysts foresee its earnings skyrocketing over the next two years. Nonetheless, Disney’s legacy global franchises, beloved brands, and diversified revenue streams position it to weather challenges and thrive in the long term. Disney emerges as a resilient stock, offering investors growth opportunities alongside stability.
Featured Image: Megapixl
Author Faith Yakubu 
