Can I Buy Disney Stock Now?

stock walt disney (NYSE:DIS) soared in the first quarter, becoming the best performing stock among all stocks in the Dow Jones Industrial Average through the first quarter.

Disney stock hit a 52-week high of $122 per share on March 28, up about 35% year to date. However, it has since fallen about 16% to its current price of about $102 per share. Disney stock is still up 16% YTD, but well below its late March/early April highs.

As we head into the second half of the year, we’ll take a closer look at Disney’s prospects and whether its current stock price is a buy.

proxy war victory

Disney’s rise in the first quarter was due to several factors, including solid earnings results, gains from its struggling streaming business, a new venture for a sports streaming service, and a victory of sorts that fended off proxy challenges from activist investors, especially Hedge. Nelson Peltz, fund manager at Trian Partners.

Peltz has long pushed for change at Disney, primarily calling for cost cuts and improvements to its streaming business. Disney has made significant progress on both.

Investors had hoped past proxy battles would make sailing easier for Disney going forward, but that hasn’t been the case.

Stock price falls from 52-week high

After the company reported its fiscal second quarter results on May 7, the stock fell about 9% to about $105 per share and continued to decline.

Disney announced another decent quarter, surpassing revenue expectations. However, revenue increased only 1% year-over-year, and net loss per share was 1 cent. Those lackluster numbers may have surprised investors, but when you look beneath the numbers, it looks like an overreaction.

Disney’s adjusted EPS, excluding goodwill impairment, was $1.21 per share, an increase of 30% year-over-year. While the company’s overall revenue growth slowed, its direct-to-consumer streaming business reported operating profit of $47 million. Streaming is a significant business segment and has been a major drag on Disney’s profits for some time, as evidenced by a $587 million loss in the same quarter a year ago.

Overall, revenue from the DTC business rose 13% to $5.6 billion in the quarter, boosting the entertainment division rather than dragging it down. Disney+ core subscribers increased by 6 million in the quarter.

Meanwhile, Disney’s linear TV network and movie businesses have suffered. Linear network revenue fell 8% to $2.8 billion, and content sales/licensing (also known as the film business) revenue fell 40% to $1.4 billion. Weakness in these two areas likely accounted for much of the decline in Disney’s stock price.

Is the market overreacting?

It’s somewhat shocking that Disney’s stock price fell sharply following the earnings release, considering that the company raised its guidance for adjusted earnings growth for the full fiscal year. Specifically, Disney is now calling for 25% adjusted revenue growth, up from its previous 20% growth guidance.

However, the stock’s decline could be due to the outlook for “soft” results from its streaming business in the fiscal third quarter. Indian streaming arm Disney+ Hotstar has lost cricket streaming rights.

On the earnings call, Chief Financial Officer High Johnston said Disney did not expect core Disney+ subscriber growth in the third quarter. However, management said it expects streaming to return to profitable growth in the fiscal fourth quarter and “become a meaningful future growth driver for the company, with further improvement to profitability in fiscal 2025.”

deadpool 3 and Inside Out 2 You can increase your profits

Disney’s stock price is on the rise, and its P/E ratio has soared, doubling over the past year to 111. So an adjustment was needed and the valuation came down to a better range. Disney stock’s forward P/E is now a reasonable 18, which is more in line with realistic earnings expectations.

The company may also see growth from its upcoming film, which is its first summer blockbuster. kingdom Of The Planet Of The Apes, It appears to be a hit and is the fourth highest-grossing film so far in 2024. The company also has high hopes for its next installment. Inside Out 2Scheduled to be released on June 14th. It is expected to have its biggest opening weekend of the year, with box office receipts expected to be between $80 and $85 million.

Then in July, deadpool 3 It’s scheduled for release, and early ticket sales could make it another winner for Disney.

Is it a good time to buy Disney stock?

Overall, the May stunner in Disney stock appears overdone as the company cut costs, pivoted its streaming business to profitability, and increased free cash flow.

The high P/E ratio is concerning, but Disney’s earnings have suffered amid massive cost cutting and restructuring. Meanwhile, stock prices soared after the voting rights exercise. Going forward, prices should be more in line with actual earnings, which makes forward P/Es more reasonable.

A strong summer box office, continued momentum in streaming, and the growth potential of upcoming sports streaming ventures could all give Disney a boost. But I’m more hopeful for the second half of the year, when Disney stock could surge again.

In the short term, prices may fall a little further in the weak June quarter, which could perhaps provide a better buying opportunity.