Is Disney Stock A Buy Right Now As Disney+ Takes Off? (2024)

Walt Disney's (DIS) theme parks are bustling again — following a long slow period during the pandemic. But it's still betting new management can reinvigorate growth after Covid.

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The company easily beat Wall Street targets for fiscal third-quarter earnings, revenue and subscribers. The stock is trying to rally after underperforming since Covid struck and the company got into political hot water with Florida. Florida is home to Disney's largest theme park complex.

It's been a wild ride on Wall Street since early 2020, as the stock market fell into a bear amid the coronavirus crash. Disney stock got slammed as the Dow Jones index company closed its theme parks and suspended Disney Cruise Line departures. Shares of Disney are down nearly 25% this year, making it one of the worst Dow stocks.

Shift For Dow Jones Disney Stock

While its theme parks and cruise businesses got hit, the entertainment giant found success with its Disney+ streaming service. And reopening movie theaters are boosting prospects for box-office sales. But it needs to find a balance between streaming and in-person revenue.

Disney's content wins are slowing down, too. Last year Disney films won 23 Oscar nominations. That includes Pixar's "Luca," "Raya and the Last Dragon" and "Encanto." "Encanto" won the award for animated feature film. Theatrical releases, though, continue to struggle. Its "Lightyear" film opened to disappointing results. It only grossed roughly $156 million through late June, below its $200 million budget. It's one of Pixar's only bombs.

IsDisney stockis a buy right now? Read on to find out.

New CEO Takes The Helm

CEO Bob Chapek, former chairman of Disney Parks, Experiences and Products, was named new chief executive after Bob Iger stepped down in February 2020. At the time, Iger said he would stay on until the end of 2021 as executive chairman and direct the company's creative endeavors.

Under Iger's 14-year-plus tenure, Disney stock soared more than 400%, or about 12% annualized. He revamped the theme parks, brought Star Wars, Marvel and Pixar into the company's movie universe, and launched Disney+. It's been a roughly ride for Chapek, who is navigating the huge investment needed to keep people subscribing to Disney+, in addition to reopening parks and cruises. And he has the headache with Florida to deal with.

Disney+ Continues To Grow

After the August 10 close, Disney reported higher-than-expected fiscal Q3 earnings, as Disney+ streaming subscriptions came up strong. It earned adjusted earnings of $1.09 a share on revenue of $21.5 billion vs. S&P Global Market Intelligence forecasts for $0.99 on $21.0 billion.

Disney+ added 14.4 million subscribers for a total of 152.1 million, above views. The streaming service was a key revenue driver during the pandemic, as people are stuck at home due to Covid restrictions.

Analysts now see the stock, which has languished all year, to hit 145.51 in 12 months. That's nearly 21% potential upside.

Meantime, theme park revenue picked up. Disney Parks, Experiences and Products segment sales jumped 70% to $7.4 billion in Q3. But losses in the streaming business continue to hurt the business. Its expected to turn a profit in 2024.

For fiscal 2021 Disney earned $3.03 a share, 270% better than fiscal '20. Revenue for fiscal '21 grew 20% to $72.99 billion.

Humble Beginnings

It's hard to believe the $172 billion market cap behemoth started out in 1923 as Disney Brothers Cartoon Studio, by Walt and his brother, Roy O. Disney. Highlights along the way included Disney's first sound film, "Steamboat Willie," in 1928, its first feature-length animated film, "Snow white and the Seven Dwarfs" in 1937, and a foray into television in 1950.

In 1955, Walt's theme park came into fruition as Disneyland in Anaheim. A second location in Orlando, Fla., was announced in 1965. The following year, Walt passed away, leaving Roy in charge. Walt Disney World opened in 1971, two months before Roy's death. But the company kept growing.

Disney Stock Fundamentals — And Earnings

IBD Stock Checkup assigns Disney a 52 Composite Rating, which combines key fundamental and technical metrics in a single score. The media giant ranks 14th in the 20-stock Media-Diversified group, based on that rating.

A 66 Earnings Per Share Rating reflects a three-year earnings growth rate of -35%, which includes a 19% decline in fiscal '19 and a 65% drop in fiscal '20. As noted earlier, fiscal '21 EPS rose.

Analysts now expect EPS to jump 66% for the fiscal year ending in September 2022, followed by a 39% jump in fiscal '23, according to S&P Global Market Intelligence. The company reports fiscal fourth-quarter results in November.

Is Disney Stock A Buy?

After breaking out from a flat base and rising to record highs in November 2019, Disney stock tumbled more than 40% during the coronavirus market crash. It found a bottom on March 18, 2020, before making its way back to fresh highs. But now it's trying to find its footing.

Since then, Disney cleared several buy points en route to a March 8 record high last year. It had been sinking in the year since, but most recently moved below its 50-day moving average.

The stock is now more than 35% off its 52-week high, according to IBD MarketSmith chart analysis.

The relative strength line, which compares a stock's performance to the S&P 500, keeps heading sharply lower and hasn't found a solid bottom. The recent rally, though, shows promise.

Disney is not a buy right now. It needs to first show significant improvement. It's worth watching, though, to see how the media giant fares now that its theme parks, cruises and movie theaters are back in action. Wait for the stock to rise above its 200 day moving average of 128.25 before getting too bullish.

And don't forget to keep an eye on the market's action. You'll want to wait until the market is in a confirmed uptrend, which means investors can buy leading stocks at proper buy points. Read The Big Picture for detailed daily analysis of what's going on in the stock market.

Follow Matt Krantz on Twitter at @mattkrantz

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