Investing

Disney Shares Still Beaten Down

Douglas A. McIntyre

Published: December 4, 2024 8:15 am

Key Points

• Though Walt Disney Co. (NYSE: DIS) stock has risen lately, overall its performance remains a disaster.
• Investors remain skeptical about whether the entertainment giant is turning around.
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The promise of a new chief executive officer and mediocre earnings helped lift Walt Disney Co. (NYSE: DIS) stock recently. However, the performance remains a disaster. After a run-up in late 2020 and early 2021, shares have fallen from $190 to $116. Over a longer, five-year period, shares are down 21%, while the S&P 500 is 92% higher. Disney remains a traditional media and theme park company; these legacy businesses do not impress investors.

Disney’s Past and Future

For some reason, investors drove Disney shares up in late October when the company announced that current CEO Bob Iger would be replaced in early 2026. That is far enough in the future to see why it matters. Iger has been CEO since November 2022. He held the same position from 2006 until 2020. He was then executive board chair until the end of 2021. His replacement in 2020, Bob Chapek, held the CEO job for under a year.

Iger has made the company’s streaming business profitable, but it has lost several billion dollars since the launch of Disney+. Ironically, the big push into streaming was Iger’s decision. Disney+ launched in November 2019. It still faces tremendous competition from industry leaders Netflix and Amazon Prime Video.

In the most recently reported quarter, Disney’s revenue rose modestly to $22.6 billion year over year, and per-share earnings rose 79% to $0.25.

Disney’s media and sports businesses, which include ESPN, its film studios, and legacy media, including ABC, did relatively well last quarter. However, the huge theme park division, which the company calls “Experiences,” struggled. Revenue rose only 1% to $8.3 billion. Operating income fell 6% to $1.7 billion. The division is nearly half of Disney’s total operating income.

The open question about Disney’s parks is whether they have become too expensive. CNBC estimates a one-day park pass per person averages between $150 and $190.

Iger has started to turn Disney around, but the process still needs to be completed. The share price shows the market is skeptical.

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