Disney’s stock is trading lower than at the start of 2023; however, there’s good scope for an upswing.
Securing gains has been a struggle for shareholders of Walt Disney (NYSE: DIS). As we entered the Memorial Day holiday weekend, the media giant’s shares stood at $88.29, lower than its mid-November price of $91.80 (just before Bob Iger took up the reins as CEO) and the $88.97; it debuted with at the year’s onset.
Financial analysts, including Truist’s Matthew Thornton, are pulling back their bullishness on Disney’s shares. Thornton revised his price target from $121 to $105 while maintaining his buy rating. He adjusted his short-term earnings forecast to account for the unexpected closure of Disney World’s Star Wars-themed hotel later this year.
Despite some market inconsistencies and perceived unfair price dips, Disney as an enterprise is faring notably better than Disney as an investment. Here’s a look at recent developments that position Disney as one of my top blue-chip picks for the remaining months of 2023.
Disney Reclaims Its Throne at the Box Office
The live-action remake of The Little Mermaid was the weekend’s top performer at local cinemas. Disney has produced 5 out of the 6 biggest domestic box office opening weekends since November of the previous year.
The overall outlook for theatrical distribution remains challenging. Total domestic box office returns for the holiday weekend were slightly less than $200 million, a 10% decrease from both 2019 and 2022’s figures. Critics quickly note that the industry is still 24% below the pre-pandemic ticket sales volume of 2019.
However, as 2023 progresses, the trend is improving. Audiences are returning to theatres, and Disney is leading the charge. Post-pandemic, Disney has more opportunities than ever to capitalize on successful films through digital distribution.
Disney+ Sees Progress on the Bottom Line
Once a catalyst propelling Disney’s shares to a record high of over $200 two years ago, Disney+ has since been a financial burden dragging down share prices. This is set to change.
CEO Iger has expressed his commitment to making Disney+ profitable by the end of fiscal 2024. This is integral to his plan to achieve $5.5 billion in annual savings before he steps down at the end of the following year.
Achieving this goal is no small task. Over the past six quarters, Disney’s streaming segment has racked up an operating loss of $5.7 billion. However, the tide is turning. Earlier this month, under Iger’s leadership, Disney reported its smallest quarterly deficit in over a year for its direct-to-consumer division. Continued sequential improvement here could ease investor concerns about Disney’s overall performance.
Thrilling Rebound for Theme Parks
COVID-19 closures hit Disney’s theme parks particularly hard, with Disney World closed for four months, and Disneyland shut down for over a year. The company’s international destinations also experienced intermittent lockdowns.
Despite these setbacks, the reality has proven more promising than anticipated. Disney’s theme parks segment is currently reporting record operating results. The closures enhanced Disney’s monetization strategies while building anticipation among potential visitors.
There are, of course, challenges ahead, including competition and potential recession impacts. But with Disney’s parks gradually reintroducing valued experiences and perks while boasting increased average revenue per guest, the future looks bright for Disney. In Disney’s world, there’s plenty of room for growth.
Despite current headwinds, Disney shows resilience and potential for a strong rebound in the latter part of 2023. The box office comeback, the steady progress of Disney+, and the record performance of theme parks provide compelling reasons to remain optimistic about the stock’s future. Indeed, the magic of Disney may yet cast its spell over the investment world again, providing a robust blue-chip option for those willing to weather the storm.
