Disney is set to release its Q2 FY’24 financial results on May 7, with revenues expected to reach $22.2 billion, slightly exceeding consensus estimates. Earnings per share are projected to be $1.11, in line with expectations. The company’s theme park business is expected to see modest growth, with international parks experiencing higher attendance and spending, while the domestic side may face challenges due to increased costs and tough year-over-year comparisons. Disney’s linear TV business faced headwinds in Q1, but there is optimism for improvement in Q2. The performance of Disney’s streaming business will also be closely monitored, as it has faced challenges from competition, price hikes, and loss of streaming rights.
DIS stock has declined by 35% from early 2021 levels to around $115, underperforming the S&P 500 over the past three years. Returns for DIS stock were negative in 2021 and 2022 but slightly positive in 2023, while the S&P 500 had positive returns in 2021 and 2023 but negative returns in 2022. This underperformance raises the question of whether Disney stock is undervalued in the current market environment. Despite challenges in the streaming and media sectors, there are positive aspects to Disney stock, such as cost-cutting measures to improve profitability and expectations of earnings per share growth. The stock is still down over 40% from its 2021 highs, and Trefis values it at $124 per share, indicating potential undervaluation.
Amid uncertain macroeconomic conditions, such as high oil prices and elevated interest rates, there are concerns about the potential for Disney to continue underperforming the S&P 500 in the near future. The Trefis High Quality Portfolio has consistently outperformed the benchmark index over the past three years, indicating the difficulty for individual stocks to beat the market in recent times. However, Disney’s efforts to restructure its business and cut costs may position it for a recovery in the future. Despite challenges in the streaming sector, Disney’s strong brand and content portfolio could support its long-term growth prospects.
The performance of Disney’s theme parks, linear TV business, and streaming services will be key factors to watch in the upcoming earnings release. While international parks are expected to drive growth, the domestic side may face challenges. The streaming business, including Disney+, has seen some setbacks recently but is still a significant part of Disney’s overall revenue stream. Disney’s ability to adapt to changing market conditions and maintain its competitive position will be critical for its future success. Investors will be looking for signs of improvement in key areas to assess Disney’s long-term growth prospects.
Overall, Disney’s upcoming earnings release will provide insights into the company’s performance and future outlook. Despite recent challenges, such as underperformance in the stock market and headwinds in the streaming sector, Disney remains a strong brand with potential for growth. By focusing on cost-cutting measures and restructuring its business, Disney aims to enhance profitability and drive earnings growth. The stock’s current valuation may present opportunities for investors, especially if the company can demonstrate progress in key areas such as theme parks, media operations, and streaming services.