Disney Stock Soars as Earnings Reveal Streaming Strength

We’ve raised our fair value estimate for Disney.

Matthew Dolgin 18 November, 2024 | 1:26PM
Facebook Twitter LinkedIn

Disney Bob Iger Mickey Mouse

Key Morningstar Metrics for Walt Disney

Fair Value Estimate: $125.00
Morningstar Rating: 3 stars
Morningstar Economic Moat Rating: Wide
Morningstar Uncertainty Rating: High

What We Thought of Walt Disney’s Earnings

Walt Disney DIS reported an excellent end to fiscal 2024, with very encouraging results and commentary surrounding the streaming and experiences businesses, both of which are critical to a healthy future. The strong performance of sports content allowed the legacy television business to hold up better than we expected in 2024, and the impact of legacy television on the overall results is becoming less critical. We have growing confidence that Disney has successfully evolved for the modern era, and we are raising our fair value estimate to $125 per share from $115.

For the full fiscal year, Disney’s revenue was up 3%, but its operating profit jumped 21%, mostly because the streaming business is no longer the huge drag it was through last year. Even better, the firm’s long-term outlook implies profits will continue to ramp. The firm expects high-single-digit growth in earnings per share and operating cash flow in 2025 and an acceleration to double digits the following year. We believe forthcoming revenue associated with recent investments in streaming and experiences will drive this result.

Most importantly, Disney seems to have turned a corner toward robust streaming profitability while maintaining healthy growth. Total direct-to-consumer operating income hit $321 million in the fourth quarter after reaching profitability for the first time last quarter, with $47 million in operating income. The firm kept DTC quarterly expenses mostly flat year over year while revenue grew 14%. Between Disney+ and Hulu, Disney added more than 5 million subscribers during the quarter, including about 2 million in the US. We expect the launch of the flagship ESPN streaming service in late fiscal 2025 to further bolster streaming results, though we expect some additional initial costs. However, excluding sports streaming, management expects DTC operating income to exceed $1 billion in fiscal 2025, up from $143 million in 2024.

The Walt Disney Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
The Walt Disney Co116.73 USD0.20Rating

About Author

Matthew Dolgin  is an equity analyst at Morningstar

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures