Disney (NYSE:DIS) surprised the market with a stronger-than-expected fiscal fourth quarter earnings report. The entertainment giant was able to beat Wall Street forecasts on the top and bottom line as its direct-to-consumer (DTC) business, which includes its streaming offerings of Disney+, Hulu, and ESPN+, enjoyed another quarter of profitability.

Now that Disney has put together back-to-back quarters of profits in the streaming segment, and saw subscriptions in the space jump, investors are wondering whether it means the House of Mouse has turned a corner and can grow its stock again. 

Shares of Disney have lost half their value over the past three years, but the earnings report saw the stock pop 6% on the news. DIS is up 21% year to date. Can its shares double to over $200 a stub now?

24/7 Wall St. Insights:

• Disney posted a big earnings surprise, beating analyst estimates on the top and bottom line.
• Its streaming services look like they are finally gaining traction, at the same time its movie studio released two monster hits.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Not all subscriptions are equal

Revenue rose 6% in the period to $22.6 billion as the entertainment segment enjoyed a 14% increase on the strength of its DTC business. The Disney+ and Hulu combo ended the quarter with 174 million subscribers, with the core Disney+ unit having 120 million subscriptions. That was up 4.4 million sequentially.

These are not necessarily organic subscriptions. For example, an unlimited phone plan with Verizon (NYSE:VZ) can get you all three Disney streaming services for just $10 (normally priced between $15 and $25). Charter Communications (NASDAQ:CHTR) offers an ad-supported Disney+ for free to its Spectrum TV customers.

Of course, viewers can also get free or discounted streaming services, including Netflix (NASDAQ:NFLX), through partnerships with wireless and cable carriers. T-Mobile (NASDAQ:TMUS) offers the ad-supported version of Netflix for free with some of its plans.

Yet Netflix has largely won the streaming wars and now boasts nearly 283 million subscribers, far more than any other service.

Getting back to entertaining audiences again

CEO Bob Iger’s cost-cutting plan is beginning to bear fruit as adjusted earnings surged 39% from last year to $1.14 per share as the DTC unit posted better than expected operating profits of $321 million. Last year it lost $387 million and some $1.5 billion two years ago. In the third quarter, the DTC business generated its first profit of $47 million.

Entertainment as a whole saw a 14% increase in ad revenue in the quarter, contributing $253 million in operating income. The segment was also helped out by Disney having the top two movies this year, Inside Out 2 and Deadpool & Wolverine, with the latter breaking numerous box office records. Combined, the two films generated over $3 billion in ticket sales.

It was a welcome departure for Disney Studios, which in 2023 had put out a string of horrible movies that all lost money. The two movies were also notable because they did not have any overt political or social messaging, a point many critics said were responsible for Disney’s past failures.

The gains helped Disney release guidance not only for the coming year, but for 2026 and 2027 as well. It is looking for high-single-digit adjusted EPS growth in 2025 to be followed by double-digit adjusted EPS growth in each of the next two years.

Is the Magic Kingdom magical again?

So is the magic back at Disney? Not so fast. Disney’s sports division saw flat revenues year-over-year while the gains it is making at DTC is simply offsetting the decline in its linear TV offerings. Revenue was down 6% there from last year while operating profits plummeted 38% year-over-year.

Investors also need to see whether its movie studio successes were an anomaly or a trend. Iger pointed to a number of new films that were due out over the next two years, but notably didn’t mention its live-action Snow White remake that has been mired in controversy.

Theme parks are also a question mark. While Disney cited higher guest spending, it’s simply more expensive to visit Disney parks these days. It doesn’t seem to have deterred visits all that much, but operating income rose just 5% for its domestic parks while tumbling 35% internationally.

Key takeaway

In all, Disney is finally gaining traction in some of its most important areas. While DIS stock can gain from its discounted level, I wouldn’t be expecting shares to double anytime soon. That doesn’t mean the stock isn’t a buy, but I would temper my enthusiasm for just how high it can go.

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