Three Strong Motivations to Invest in Disney Shares Without Delay
Disney, despite being a legendary business with a ticker symbol of DIS (down 22% since February 2019), doesn't seem as appealing in recent years. The S&P 500 has soared, but Disney's share price has sunk. But, disregarding popular opinions, here are three compelling reasons to consider investing in this iconic consumer discretionary stock, currently trading 46% below its peak:
1. DTC Streaming Turnaround
First and foremost, Disney's DTC streaming segment, namely Disney+ and Hulu, is showing signs of improvement. Although initially, the division experienced heavy losses as they invested in scaling up the services, the situation has improved significantly. In Q1 of Disney's fiscal 2025, this division raked in an impressive $293 million in operating income, with management predicting $1 billion for the full fiscal year and a 10% operating margin by 2026.
With a heavy focus on cost efficiency and a strategy of producing less but higher-quality content, Disney's DTC segment is continuing to grow its subscriber base, adding 12% and 9% to its base in the latest fiscal quarter for Disney+ and Hulu, respectively. This, combined with its extensive IP and a unique ability to bundle services, makes Disney a formidable player in the streaming landscape and a potential money-maker for investors.
2. Experiences Segment Expansion
Secondly, Disney's parks, cruises, and consumer products, known as the experiences segment, have always been its strongest revenue and profit driver. Currently responsible for 37% of revenue and 60% of operating income, this segment is crucial to the company's success.
Management plans to invest a substantial $60 billion over the next decade on capital expenditures in the experiences segment, with the goal of boosting capacity and serving more customers worldwide. Recognizing the significant untapped demand, Disney is seeing more opportunities to grow this segment, especially as it looks to bolster its parks and cruises offerings and expand its global footprint.
3. Undervalued Stock
Lastly, Disney shares are currently trading at 46% below its all-time high. In the face of changing media landscapes and investor concerns, there's a clear opportunity to invest in Disney at a potential discount. With a forward P/E ratio of 19.8, investors can buy this undervalued stock and benefit from the market not fully appreciating Disney's top brand, world-class IP, and expanding earnings power.
Despite the challenging environment and recent market trends, Disney's financial performance, strategic initiatives, and undervalued position make it an attractive investment opportunity for bullish investors looking to boost their portfolios.
- Given Disney's focus on cost efficiency and producing high-quality content, their DTC streaming segment, including Disney+ and Hulu, is anticipated to reach a $1 billion operating income in the full fiscal year of 2025, with a projected 10% operating margin by 2026.
- Recognizing the potential in its strongest revenue and profit driver, the experiences segment, which accounts for 37% of revenue and 60% of operating income, Disney plans to invest $60 billion over the next decade to increase capacity and serve more customers worldwide.
- With Disney's shares trading 46% below their all-time high and a forward P/E ratio of 19.8, investing in this undervalued stock could provide a significant opportunity, as the market may not fully appreciate Disney's top brand, extensive IP, and expanding earnings power.
- Rightfully, given the positive financial performance, strategic initiatives, and undervalued position, Disney's iconic consumer discretionary stock could be an appealing investment choice for investors willing to consider alternative perspectives in finance and money management, even in a challenging market landscape.
