The media giant’s share price sank during the spring and summer, but it could be turning the corner in autumn.
Seasons change, and so do losing streaks. After closing lower for five consecutive months, Walt Disney (DIS -0.98%) shares are trading higher in September with one week left to go.
It’s not just the company’s stock chart that’s finally starting to turn in the direction of a fairy tale ending. Disney is fundamentally taking steps in the right direction. There is still a lot of work for the entertainment giant to do. A lot of the bullish catalysts it’s trying to put in place will take years — not months — to show their impact. However, there are clearly some things Disney investors can look forward to as autumn gets underway.
1. Moving pictures are moving again
No studio has cranked out as many blockbusters as Disney over the years, and its recent rare dry spell appears to be coming to an end. Disney hasn’t had the year’s top-grossing film domestically since Avengers Endgame in 2019. Avatar: The Way of Water was the top draw globally in 2022, but closer to home, it was Top Gun: Maverick that sold the most theater tickets.
Disney looks well positioned to regain the top spot after five years. The two biggest movies in the U.S. so far in 2024 have been Disney’s Inside Out 2 and Deadpool & Wolverine — and the company has two more coming out this season that could be even bigger. Moana 2 hits theaters in time for the Thanksgiving spike in multiplex visits, and Mufasa: The Lion King will arrive on the final day of fall.
Disney had some pretty prolific misses last year, but this summer’s hits have eased shareholders’ minds. Its slate of fall releases should be another one-two punch of theatrical blockbusters.
Image source: Disney.
2. Disney+ is finally a plus
It was the initial success of Disney+ when it rolled out five autumns ago that sent the company’s shares surging to the all-time high they touched in 2021. Concerns about the streaming platform’s profitability have weighed on the stock ever since.
Bob Iger returned to the CEO’s chair at Disney two autumns ago to get the company back on track. One of the goals he set for himself was to get the streaming business out of the red by the end of fiscal 2024. That finish line is a week away.
The objective sounded more like Fantasyland than Main Street when it was first revealed. Disney+ and the rest of Disney’s direct-to-consumer segment were reporting massive operating losses at the time. Reality proved far kinder. Disney’s streaming business actually started generating an operating profit earlier this year. Management expects to report another set of strong results for Disney+ when it delivers its fiscal fourth-quarter report in early November. Moreover, it’s raising the prices for its premium streaming services in mid-October, so its outlook may be even rosier than before.
3. Laggards can turn into leaders
Like a spinning teacup ride, business is turning at Disney. From box office disappointments and massive streaming losses not long ago, the studio and direct-to-consumer units have turned things around. In the meantime, businesses that had been pulling their weight — theme parks and media networks — have started to meander.
Disney’s domestic theme park performance has been sluggish lately, and management warned over the summer that it won’t bounce back right away. On the networks front, the media stock bellwether has suffered from the macro headwinds of consumer cord-cutting as well as a weak recovery in advertising.
Advertising on the networks should get a boost this season both locally and nationally as political campaigns and ballot proposals pay up for airtime heading into the November elections. It may take longer for the theme parks to get a boost, but Disney turned heads this summer by announcing massive expansions across its gated attractions that will open in the next few years.
Sentiment around the stock is finally starting to turn bullish. Meanwhile, investors can pick up shares of the House of Mouse for a reasonable 18 times forward earnings, close to their lowest valuation since the start of the pandemic. It’s poetic that Disney is finally starting to rise in the fall, but there could be a lot more upticks to go this season if the entertainment giant can keep making the right moves.
Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
