If you purchased shares The Walt Disney Company (NYSE:DIS | DIS Price Prediction) around 11 years ago, you might not have a heck of a lot to show for your investment. Undoubtedly, the stock is pretty much going for prices it went for just over a decade ago. And while it’s been a real test of investor patience, it’s clear that Disney shares have been a trap for many years, but the big question moving forward is whether there’s another decade of lackluster results or if the firm can turn the tide as the AI revolution unfolds.
Certainly, a rise in AI productivity could help a grounded firm like Disney, as it struggles to gain any sort of meaningful, sustained momentum. With the $203 billion firm on the hunt for the successor to Bob Iger, perhaps it is time to be just a tad more optimistic on the House of Mouse, even if the past-decade chart is one of the most underwhelming out there.
Plenty of reasons to stick with the long-time laggard
Whether it’s the potential catalyst of a new CEO or an embracing of technology, I do think the next 10 years are highly likely to be better than the last 10. With shares trading at 16.5 times trailing price-to-earnings (P/E) at around $113 per share, the value gem might be worth picking up, especially since various hedge funds have been adding to their positions in recent quarters. Of course, Disney stock might be broken, but the cherished American icon may still have what it takes to reinvent itself for the age of AI.
Though Disney isn’t a direct AI beneficiary, there are ways it can leverage the technology to bolster earnings growth and reignite investor enthusiasm that’s been absent for the past decade. Apart from that short-lived surge during the worst of the pandemic lockdowns way back in 2021, it’s been tough sledding for Disney, but there is hope.
In this piece, we’ll look at two ways that the firm can leverage AI tech to help fuel a rebound, one that’s been nearly a dozen years in the making.
AI can drive down content production costs
When it comes to AI content, there’s been quite a lot of backlash. Whether we’re talking about AI assets in one’s favorite video game, upsetting AI ads, or growing distaste for “AI slop,” it certainly feels like there’s limited upside (and brand risk) to be had from embracing generative AI technologies at this stage. That said, the technology is getting better, and if it can be used to augment creators rather than replace them, I do think that it will be hard to avoid AI when it comes to the next generation of entertainment.
Of course, human creators aren’t going anywhere. But perhaps firms like Disney can use AI in the background to get post-production moving along faster, while also using the technology for ideas on what kinds of content audiences would crave next. If creators can effectively use AI tools, there’s potential for cost reduction, which might allow the economics of Disney+ to improve by leaps and bounds. Whether we’re talking about recommendation algorithms or driving margins, Disney stands out as a serious monetizer of the technology.
AI efficiencies across the board
With Disney inking a deal with OpenAI to invest $1 billion, it’s clear that management recognizes the opportunity at hand. And it will be interesting to see how the technology fits into the growth trajectory moving forward. With timeless brands and creatives that know how to make use of such tech, I do think Disney could rise as one of the firms that can use the tech in a way that’s invisible to audiences.
It’s not just streaming content where Disney could put AI to use. In the profitable parks business, the firm could get lines and crowds moving along more smoothly while also leveraging the tech to create even more impressive experiences. At the end of the day, AI is a margin-expansion lever that Disney can pull without taking on as significant risks as the firms at the frontier of such tech. Can it bring back the magic to Disney shares? Only time will tell.
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