Disney is set to release its Q2 FY’24 results on May 7, with revenues expected to reach $22.2 billion for the quarter, slightly above consensus estimates, marking a 2% increase from last year. Earnings are expected to be $1.11 per share, in line with consensus. Trends that are expected to drive Disney’s results include modest growth in the theme park business, with international parks seeing higher attendance and spending, while the domestic side may face some softness due to higher costs. The linear TV business saw headwinds over Q1, but there is potential for improvement in Q2. Investors will be closely watching the performance of Disney’s streaming business, which has faced challenges from competition, price hikes, and losing rights to stream the Indian Premier League. Despite a decline in the Disney+ subscriber base, average revenue per user has risen.
DIS stock has experienced a sharp decline of 35% from early January 2021 levels, currently trading around $115, compared to a 35% increase for the S&P 500 over the same period. Disney stock has underperformed the market in the last three years, with returns of -15% in 2021, -44% in 2022, and 4% in 2023, while the S&P 500 saw returns of 27%, -19%, and 24% in the same years. The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year during this period. Despite this underperformance, there are factors indicating Disney’s potential for recovery, such as a restructuring to cut costs and increase profitability, with a goal of reducing expenses by $7.5 billion by the end of the fiscal year and a projected 20% growth in earnings per share.
Despite concerns in the streaming and media operations, analysts remain positive on Disney stock for several reasons. The company’s efforts to unlock more value through restructuring and cost-cutting are expected to boost profitability, with earnings per share projected to grow at least 20% compared to the previous year. Disney stock is currently down over 40% from its 2021 highs, leading analysts to value it at around $124 per share, about 10% above the current market price. An analysis of Disney’s valuation and revenue streams provides further insight into the factors driving these estimates. With an uncertain macroeconomic environment, including high oil prices and elevated interest rates, the question remains whether Disney will continue to underperform the S&P 500 or see a potential recovery in the coming months.
In conclusion, Disney’s Q2 FY’24 results are eagerly awaited, with expectations of revenue growth and stable earnings per share. The company’s theme park business, streaming operations, and cost-cutting measures will be key areas of focus for investors. Despite a recent underperformance in the stock market, Disney’s potential for recovery and value creation through restructuring provide reasons for optimism among analysts. The evaluated price target of $124 per share suggests that Disney stock may be undervalued in the current market environment. As uncertainties persist in the macroeconomic landscape, the future trajectory of Disney’s stock performance remains uncertain, with potential for either continued underperformance or a turnaround in the coming months.
