Three Justifications for Purchasing Disney Shares, with a Suggestion to Do So in January
Investors who were optimistic about Walt Disney's (DIS 0.10%) comeback in 2024 received a sort of bounce back. Disney's stock saw a 24.5% increase last year, with that pesky half-percent slip-up only stopping it from outperforming the S&P 500's 25% gain. While not a record-breaking performance, it wasn't a failure either.
Is Disney's reign in entertainment and media coming to an end? I don't think so. I'm not betting on Disney to outshine the broader market, but I'm confident it will maintain its position at the top of the entertainment industry. Here are three reasons to buy it, with an additional one to seek out the stock right now.
1. Streaming has turned profitable
As a global powerhouse in content creation, it's unsurprising that Disney has developed one of the most competitive streaming platforms globally. This includes Disney+, Hulu, and ESPN+. The company has been a dominant force in media for decades, with a portfolio that includes ABC and several smaller networks. It made a pioneering switch to streaming in 2019 and reaped the benefits when the pandemic forced people indoors just a few months later.
Although Disney+ quickly rose to the top of streaming, it took time to turn a profit. However, in the 2024 fiscal fourth quarter (Sept. 28), entertainment streaming reported an impressive $253 million in operating income, up from a $420 million loss the previous year. Total streaming operating income was $321 million.
Disney ended the quarter with 174 million total streaming subscriptions, including 120 million core Disney+ subscriptions – a 4.4 million increase from the previous year. The ad-supported platform contributed 14% of this growth. Management projects a substantial $875 million increase in entertainment streaming operating income in 2025.
Earnings per share (EPS) for the year jumped from $1.29 to $2.72, with management anticipating a modest increase in adjusted EPS for 2025.
2. Anticipated blockbusters are on the way
Disney is a colossal company, with numerous moving parts. When all the cogs work together, the result is nothing short of spectacular – like a Disney fairytale come to life.
Disney, through its renowned studios, is paving the way for several blockbuster releases this year. The company traditionally commands the top spots on the box office charts. In 2024, it held the top three spots worldwide with Inside Out 2, Deadpool & Wolverine, and Moana 2, as well as No. 7, The Lion King: Mufasa.
Disney has 10 movies lined up for release in 2025, many being sequels or adaptations of its existing content, like Avatar: Fire and Ash and the live-action Snow White. Disney's secret sauce is producing engaging content and then leveraging it across different mediums – theater, streaming, parks, and merchandise, creating an endless source of revenue.
3. Parks are performing well
Disney parks are the crown jewels of its empire. They are unlike any other park around the world, offering a unique and magical experience. Although Disney's content library can compete with other film studios and streamers, none can match the unparalleled magic of its parks.
The parks and experiences segment could have fared better in the fourth quarter, with a 1% sales increase and a 6% operating income decrease. However, management is optimistic about a recovery in the American consumer and investment in new attractions, like themed resorts and cruises, to boost future growth.
Lastly, why now?
Disney is set to release its earnings on Feb. 5. With streaming profits on the rise and parks attendance vastly improving, the news could be positive. But don't expect it to soar post-earnings – there's no guarantee of that. Consider Disney stock for its industry-leading position and the recently reinstated dividend, which adds that extra sweetener.
Given that Disney's streaming platform is now profitable, with an impressive operating income of $253 million in the 2024 fiscal fourth quarter, investors looking to invest in finance might find Disney's stock a promising opportunity. The company's anticipated blockbuster releases and recovering parks performance further bolster its potential for continued growth in the entertainment industry.
