Disney is set to release its Q3 FY’24 financial results in early August, with expectations for revenues to reach $23.2 billion, a 3% increase from the previous year. Earnings are anticipated to come in at $1.19 per share, in line with consensus estimates and up from $1.03 in the same period last year. Disney’s strong performance from its theme park business following the pandemic is expected to slow down in Q3, with growth rates not sustainable as post-Covid travel declines. Additionally, the Entertainment business may see headwinds due to lower advertising and affiliate revenues, although the theatrical business could receive a boost from the success of the Inside Out 2 movie.
Over the past few years, Disney stock has underperformed the market, with a 50% decline from early 2021 to around $90 currently. This contrasts with the S&P 500’s 50% increase during the same period. Despite this underperformance, the Trefis High Quality Portfolio has consistently outperformed the S&P 500, indicating the potential for a recovery in Disney stock. The current uncertain macroeconomic environment, with high oil prices and elevated interest rates, could impact Disney’s performance in the coming months. However, the company is making efforts to cut costs and restructure its business to improve profitability, with earnings per share projected to grow at least 20% compared to the previous year.
While concerns remain around Disney’s streaming and media operations, there are positive factors that could support the stock. Disney’s cost-cutting initiatives and business restructuring aim to unlock more value, with a target of reducing expenses by $7.5 billion by the end of the fiscal year. The company is also projected to meet or exceed this goal, driving earnings per share growth. Despite these efforts, Disney stock is currently undervalued in the market, with Trefis valuing it at around $137 per share, approximately 50% above its current price. Investors are advised to closely monitor Disney’s valuation and financial performance to determine its potential for future growth.
Disney’s streaming business has faced challenges from increased competition, price hikes, and loss of streaming rights for popular content like the Indian Premier League. Despite these hurdles, the direct-to-consumer streaming segment saw a 13% increase in overall sales in the last quarter, with Disney+ Core subscribers growing by over 6 million. Investors will be keen to see how Disney navigates these challenges in the coming quarters and whether its efforts to enhance profitability through cost-cutting and restructuring will have a positive impact on the stock’s performance. Overall, Disney’s upcoming Q3 results will provide valuable insights into the company’s performance and future outlook, shaping investor sentiment and stock movement in the market.
