Disney’s Earnings Performance
After Disney’s fiscal third-quarter results were unveiled, the market initially responded with enthusiasm. The entertainment giant boasted a 35% surge in earnings per share to $1.39, beating expectations by 15 cents. This positive momentum was supported by a 3% revenue climb to $23.15 billion, outperforming estimates by 1%. Despite these stellar figures, Disney’s stock witnessed a subsequent 5% decline post the earnings report and now rests 30% below its year-long peak.
Streaming Success & Subscriber Growth
The hallmark of Disney’s recent achievements is its leap into profitability within its streaming business. Disney Plus, Hulu, and ESPN+ combined to break even sooner than anticipated, marking a significant milestone for the company. In addition, Disney+ Core subscribers ticked up to 118 million, solidifying its position as a strong contender in the streaming realm.
Earnings Forecast & Valuation
Disney’s robust performance prompted a revision of its full-year EPS guidance, now projecting a 30% growth in fiscal year 2024, a modest increase from the previous target of 25%. Despite trading at $85, Disney’s stock valuation remains appealing at 18 times forward earnings, notably lower than S&P 500’s 22.4 and Netflix’s 33 times earnings. Moreover, Disney’s shares are well off their historical peak of 134.4 times forward earnings and appear undervalued relative to the median of 21.3 times.
Conclusion
The market’s reaction to Disney’s post-earnings dip presents an intriguing opportunity for investors, albeit not without its uncertainties. While the stock showcases promising prospects, prudent caution is advised, especially in light of recent adjustments to FY25 earnings estimates. Nevertheless, with a solid performance in Q3 and a compelling valuation, Disney exudes a blend of optimism and cautious optimism.
