Walt Disney Company (DIS) Analysis
Analysis done on hourly timeframe. It has been a rough five years for Disney shareholders, with the stock lagging behind the market due to interest rate pressures and post-pandemic struggles. However, things may be looking up for the famous company as the Fed eases monetary policy, and new leadership makes better decisions.
Let’s go back to 2019, when Disney posted a massive 16% year-over-year growth and more than $11 billion in profits. This was a good time for Disney—its shares had reached an all-time high, and its dividend was hefty enough to keep shareholders happy. Just a year later, as the pandemic struck, Disney’s revenue fell 6%, and profits plunged to a nearly $3 billion loss. During this time, interest rates were near zero, and nearly every company on the market benefited from a market-wide rally. However, Disney’s losses caught up with them in the years that followed, resulting in a massive 60% correction.
To this day, Disney remains more than 50% below its all-time highs, largely due to a prolonged proxy battle and CEO issues. Nevertheless, the company has made improvements, even reinstating its dividend to attract investors. Rising ticket prices and new revenue streams, such as Disney+ and Hulu, have contributed to growing revenue from $69 billion pre-pandemic to nearly $90 billion in 2023. The company’s balance sheet has also strengthened, with a healthy 2:1 ratio of $205 billion in assets and $92 billion in liabilities. Additionally, free cash flow has rebounded toward pre-pandemic levels, reaching $8 billion over the past twelve months.
So, why is Disney’s stock still struggling?
The issue for Disney is profitability. The company has yet to recover its net income to pre-pandemic levels. In 2023, Disney’s full-year net income was $2.35 billion, down 25% from the previous year and 80% from 2019. While the first three quarters of 2024 have shown strong revenue, net income has been mixed. The company reported $1.91 billion in Q1 2024, a loss of $20 million in Q2, and $2.62 billion in Q3. While they are performing better than last year, the final quarter could be a deciding factor.
Summary:
Disney is clearly a well-positioned company with a large enough customer base to weather the ups and downs. The company has faced many headwinds in recent years, but those are now starting to fade. While Disney has made significant strides in recovery across various aspects, profitability remains the key issue. The current valuation makes Disney attractive for a long position, but investors should closely monitor net income and future projections in the coming quarters.