Could Disney's Shares Reach Past the $100 Mark During This Week?
It's been over four months since Walt Disney Company's (DIS 0.59%) shares haven't traded in triple digits. The media behemoth's stock last surpassed $100 in late June, but it's nearing the $100 mark again.
The shares have been on an upward trajectory for the past three months, and they even reached intraday highs of over $99 for the last three trading days of the previous week. All it takes is one last push to break the $100 barrier, which could come with an upcoming major financial report.
Attracted to results
Disney usually reports its earnings towards the end of the earnings season. The company is scheduled to announce its fiscal fourth-quarter results on Wednesday afternoon. Although revenue expectations are modest, earnings predictions are quite optimistic.
Analysts anticipate a 5.8% increase in revenue to reach $22.4 billion for the summer quarter that ended in September. This is actually a speed up from the 4% increase it posted three months earlier and the 2% gain it achieved through the first three quarters of 2024.
The segments that drove Disney's growth during the pandemic have started to slow down. The theme parks, which recovered quickly to generate record operating profits, have been experiencing a decline in revenue recently. A 4% increase in domestic gated attractions revenue in the third quarter was partly offset by a decline in international parks' revenue. Operating income dropped as well. Disney warned in the summer that the decline in demand it experienced would continue for the following quarters. For the segment it will discuss later this week, Disney is projecting a decline in operating income of mid-single digits.
The linear media networks business, which provided stability during the pandemic as people stayed at home, has now returned to a decline. Revenue is dropping due to a shrinking viewer base and decreasing ad impressions due to cord-cutting.
On the bright side, other parts of Disney's business are picking up the slack. Its streaming service has been growing steadily over the years, at the expense of its linear networks, but now it's finally profitable. In August, Disney shared that it expects its core Disney+ subscriber base to grow moderately in the fourth quarter. After a challenging 2023 with mixed results for its theatrical releases, Disney regained its footing in the summer with hits like "Inside Out 2" and "Deadpool & Wolverine."
Earning its stripes
The bottom line could be the deciding factor. Analysts estimate a 34% increase in earnings per share to $1.10, in line with Disney's guidance for a 30% increase in adjusted earnings for the entire fiscal year. CEO Bob Iger returned to lead the company two years ago, focusing on cost cuts without compromising the brand's renewal. He's been successful in improving the bottom line, and now the clock is ticking for him to win back Wall Street's favor.
The short-term outlook is encouraging, even though the stock dropped for five consecutive months before its recent recovery. Disney's streaming business profitability will present it with additional flexibility, enabling it to balance the gradual decline of its legacy media networks. Looking to the movie industry, Disney already has the two most popular movies of 2024. By the time "Moana 2" opens later this month and "Mufasa: The Lion King" debuts in December, Disney could have four of this year's top five theatrical releases (or at least four of the top five). The theme parks may take some time to recover, but Disney announced in the summer a roadmap for improvement, with major new experiences coming in the next few years.
Add to that a cruise ship fleet that will double in capacity in a couple of years, and you have a media stock ready for its close-up. A strong report will push the shares above $100 again. Now it just needs to maintain its growth and successfully navigate a strategic succession plan for Iger to remain in the limelight.
Investors watching Disney's earnings report on Wednesday are hopeful that the company can maintain its growth and break the $100 barrier for its shares. The upcoming financial report is predicted to show a 34% increase in earnings per share, which could boost investor confidence and lead to further investing in the company's finance.
Analysts believe that Disney's strong performance in its streaming service and recent successful theatrical releases, such as "Inside Out 2" and "Deadpool & Wolverine," will contribute to the company's overall financial success and potentially result in higher returns on investing in the company's future.
