Can Disney Stock Benefit from Streaming Growth in Q4?

Disney is gearing up to release its Q4 FY’24 results around November 14, with revenue expected to hit $22.5 billion, a 6% increase compared to the previous year. Earnings are projected at $1.11 per share, in line with estimates and up from $0.82 in the same period last year. The company’s performance is expected to be driven by various factors.

The Entertainment business at Disney is experiencing a mixed performance. While the linear TV business has faced challenges due to reduced advertising and affiliate revenues in the domestic market, the streaming segment is showing strength. Disney+ and Hulu are witnessing growth in pricing and advertising revenue. Disney has focused on enhancing monetization, with recent price hikes for Disney+ plans. The streaming business turned profitable last quarter, and this trend is likely to continue in Q4, although Disney+ subscriber growth may be modest.

Concerns loom over Disney’s theme park operations despite a solid post-Covid reopening performance. The Experiences business, including theme parks, saw a slight revenue increase in Q3 FY’24, but operating profit declined. Disney anticipates a mid-single-digit decrease in Experiences operating income for Q4, citing higher costs and attendance level normalization. Factors like reduced consumer travel to Disneyland Paris due to the Olympics and cyclical issues in China may impact the segment, offset by a strong performance from the Disney Cruise Line.

DIS stock has underperformed the market in recent years, but the High-Quality Portfolio, comprising 30 stocks, has shown consistent outperformance. The uncertain macroeconomic environment raises questions about Disney’s future performance compared to the S&P 500. The company’s restructuring efforts and cost-cutting initiatives aim to boost profitability, with earnings per share expected to grow by nearly 30%. Despite challenges in streaming and media, Disney stock is valued at $116 per share, indicating potential undervaluation.

In conclusion, Disney’s upcoming financial results reflect a mix of challenges and opportunities across its business segments. The company’s strategic initiatives and focus on profitability could drive stock performance in the coming quarters, offering potential value for investors.