Disney Stock’s Path to Recovery: What to Expect in the Next Year

Disney Stock

The Walt Disney Company (NYSE:DIS), a globally recognized brand valued at $172.82 billion, has faced significant challenges in the past decade, trailing behind broader market performance. Despite historical setbacks, investors are keen to know if Disney can regain momentum in the coming year.

Q4 Performance Overview

As a global entertainment giant with theme parks, movie production, and online streaming ventures, Disney’s fiscal Q4 2023 showcased a 5% year-over-year revenue increase to $21.2 billion. The strength in streaming, theme parks, and cruise lines mitigated weaknesses in movies and Disney World attendance.

Notably, Disney’s commitment to cost-cutting strategies resulted in adjusted earnings of $0.82 per share, surpassing estimates of $0.68 per share. Each of Disney’s primary business lines reported increased operating income in the September quarter.

Streaming Business on the Rise

While Disney’s streaming business remains unprofitable, there was a promising 74% reduction in operating losses in Q4. Operating losses for Disney+ narrowed to $400 million, a substantial improvement from $1.4 billion in the previous year. Disney’s focus on cost reduction also led to its highest free cash flow in the last five years.

Despite the initial losses, Disney+ added 7 million subscribers, driven by international market growth. The company also increased average revenue per user through higher ad sales, leveraging its extensive portfolio of popular global intellectual properties.

Future Outlook and Targets

Disney aims to further cut costs and anticipates a $7.5 billion reduction in expenses in fiscal 2024. The company expects its streaming segment to turn a profit within the next 12 months, focusing on reducing marketing and distribution costs.

Analysts project a 4.3% revenue growth to $85 billion and a 19.4% expansion in adjusted earnings to $4.12 per share in fiscal 2024. With forward earnings multiple of 22.9x, Disney’s stock is considered reasonably priced. Out of 25 analysts covering Disney, 16 recommend “strong buy,” two recommend “moderate buy,” six recommend “hold,” and one recommends “strong sell.” The average target price for Disney shares is $106.70, suggesting a potential upside of more than 12% over the next year.

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