Chicago, IL – February 4, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Disney DIS, Amazon AMZN, Netflix NFLX and Comcast CMCSA.
Disney is slated to report first-quarter fiscal 2025 results on Feb. 5.
The Zacks Consensus Estimate for revenues is pegged at $24.7 billion, suggesting modest growth of 4.87% from the year-ago quarter’s reported figure.
The consensus mark for earnings has moved south by a penny to $1.44 per share over the past 30 days, indicating growth of 18.03% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
In the last reported quarter, Disney delivered an earnings surprise of 4.59%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.59%.
The Walt Disney Company price-eps-surprise | The Walt Disney Company Quote
Our proven model predicts an earnings beat for Disney this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
DIS has an Earnings ESP of +2.85% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
As the media landscape shifts from traditional linear TV to streaming, Disney finds itself in an enviable position. With two robust U.S. streaming services, Disney+ and Hulu, complemented by ESPN+, the entertainment giant is well-equipped to navigate this transition seamlessly.
One of Disney's key advantages is its bundling strategy, which combines these streaming services into a compelling package. In the quarter under review, Disney further strengthened its streaming offering with the introduction of the ESPN tile on Disney+, providing the Trio Bundle subscribers full access to all of the ESPN+ sports content starting Dec. 4. This approach is not only expected to have boosted average revenue per account in the to-be-reported quarter but is also likely to have helped reduce customer churn.
Disney+ Core subscribers grew 4.4 million in the fourth quarter of fiscal 2024. In the quarter under review, the company expects a modest decline in Disney+ Core subscribers versus fourth-quarter fiscal 2024 due to the expected temporary uptick in churn from both the price increases and the end of a promotional offer in the previous quarter. DIS is likely to have suffered from a persistent decline in Linear TV revenues, which is expected to have negatively impacted Media and Entertainment Distribution revenues in the to-be-reported quarter.
The company expects first-quarter fiscal 2025 Content Sales/Licensing and Other operating income to be relatively in line with the fourth quarter of fiscal 2024. Our model estimates for Entertainment revenues (which include Linear Networks, Direct-to-Consumer and Content Sales/Licensing and Other Revenues) are pegged at $10.19 billion, indicating an increase of 2.2% year over year.
DIS’ true strength lies in its unparalleled portfolio of Intellectual Property (IP). From the iconic Marvel and Star Wars franchises to the beloved Disney princesses, Mickey Mouse and Pixar's timeless classics, the company owns the most powerful collection of IPs in the media industry. This wealth of IP is a significant asset, as it gives audiences an immediate connection to the content, reducing the risk associated with content investments. The company's extensive library of IP not only fuels its studio operations but also underpins its entire business ecosystem, including streaming, linear networks and the profitable Parks, Experiences & Consumer Products segment.
In the Experiences segment, Disney expects 6-8% segment operating income growth compared to fiscal 2024, weighted to the second half of the year. As we discuss the quarter under review, investors should pay close attention to key metrics, such as park attendance, per-capita spending and any announcements regarding expansion plans, particularly in international markets. The performance of this segment might have provided a strong foundation for Disney's overall growth trajectory.
Our model estimate for the Experiences segment (renamed from Disney Parks, Experiences and Products) revenues is $9.78 billion, indicating 7.1% growth year over year. Its theme parks and resorts continue to be a significant revenue driver, and the potential for growth in emerging markets of Asia remains promising.
Shares of DIS have returned 17% year to date compared with the broader Zacks Consumer Discretionary sector’s growth of 15.4%. Disney operates in a fiercely competitive streaming market dominated by the likes of Amazon-owned Amazon Prime Video and Netflix, as well as the growing prominence of services from Apple, Comcast-owned Peacock and HBO Max.
Valuation-wise, Disney is trading at a premium with a forward 12-month P/E of 19.99X compared with the Zacks Media Conglomerates industry’s 19.74X, reflecting a stretched valuation. The company’s debt balance of $47.81 billion compares unfavorably with cash, cash equivalents and its current marketable investment securities balance of $6 billion.
Disney remains a prominent name in the investment world, long revered as a blue-chip stock and a staple in many portfolios. DIS' strength lies in its globally recognized brand and diverse intellectual properties spanning movies, TV shows, theme parks and merchandise. This diverse portfolio has historically given Disney a unique edge in captivating audiences worldwide and generating consistent revenue streams.
However, recent years have brought significant challenges, including disruptions in traditional media, pandemic impacts on theme parks and evolving consumer behaviors. These headwinds have prompted investors to reevaluate Disney's appeal, questioning whether the Magic Kingdom can maintain its former allure in an increasingly competitive and rapidly changing entertainment landscape.
For those considering how to play Disney stock in the first quarter of fiscal 2025, a nuanced approach may be warranted. Investors with a shorter investment horizon may want to exercise caution and wait for a better entry point, given the uncertainties surrounding the company's growth prospects and the competitive pressure it faces despite the enduring power of the Disney brand.
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