Can Disney Stock Stay Above $100 This Time?

The good news is that Walt Disney (DIS 9.72%) delivered blowout bottom-line results for its fiscal first quarter (ended Dec. 30, 2023) on Wednesday afternoon. The solid results alongside other beefy announcements pushed the shares above $100. The bad news is that it has always returned to the double digits in the past. Can it be different this time?

There was a lot riding on this week’s financial update. With Disney fighting proxy battles on more than one front ahead of April’s annual shareholder meeting, this would be its best shot to rally the bulls and silence the critics that wanted representation in the boardroom.

A whole new world

Disney packed for war. CEO Bob Iger made sure he loaded his quiver with plenty of arrows. Some of them were pretty pointy.

  • Disney now expects its annualized cost savings by the end this fiscal year to “exceed” $7.5 billion.
  • It’s making a $1.5 billion investment in Fortnite developer Epic Games, and in the process creating a games and entertainment universe within the popular online video game.
  • Its board approved plans for up to $3 billion in share repurchases. It’s Disney’s first buyback since fiscal 2018.
  • Remember that wildly popular Taylor Swift concert film that cleared more than $180 million at the box office last year? It’s coming exclusively to Disney+ next month.
  • An animated series based on Moana will instead be a theatrical release in November. This is not the live-action version of the movie that is also in the works.
  • Disney increased its semiannual dividend by 50% to $0.45 a share. The new payment won’t go out until July, but it made it a point to announce it in early February.

There were a lot of stock-moving announcements. Then we get to the actual results, which were particularly impressive. Revenue of $23.5 billion was flat with the prior year’s fiscal first quarter, but that’s not a surprise. A 7% year-over-year decline in entertainment revenue was offset by gains for its sports and experiences segments.

The bottom line is where heads start to turn. Analysts were expecting adjusted earnings to come in flat with the $0.99 a share it posted a year earlier. Adjusted net income clocked in at $1.22 a share. An 86% improvement in the operating loss for its direct-to-consumer segment was the biggest driver. There were also healthy jumps at its sports and international theme parks businesses.

Disney guests celebrating in front of a sign celebrating Disney turning 100 years old.

Image source: Disney.

“Disney” and “disrupt” start with the same three letters

“I’d rather be a disruptor than to be disrupted,” CEO Bob Iger said on CNBC following the earnings release but before his company’s earnings call.

You can’t describe anything that Disney is doing right now as playing it safe. Teaming up with two sports networks rivals to launch a bundled streaming app in the fall of next year isn’t safe, especially when its own ESPN is the top dog in that space. Agreeing to nearly double its capital expenditures to $60 billion over the next 10 years for its theme parks isn’t safe, especially at a time when it’s eyeing billions of cost cuts elsewhere.

You also can’t call anything that Disney is doing right now not smart. Making a 10-figure investment in a software developer doesn’t sound bright at first, but it gives the House of Mouse a way to reach the largely young audience on Fortnite that isn’t typically exposed to ads and other brand missives. Taking a project that was originally slated for Disney+ and packaging it for the multiplex sounds desperate, but the original Moana film was the most streamed movie on any platform in the U.S. last year. Imagine how strong the fiscal first quarter of 2025 will be by the end of this calendar year with a Moana sequel and Mufasa: The Lion King on the slate.

The media stock had a lot to prove this week. In the span of an hour yesterday it turned headwinds into tailwinds, bears into bulls, and a proxy battle into Jiminy Cricket chirping. This is where momentum starts and the double digits start fading in the rearview mirror.

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