Disney (DIS 1.01%) is a powerful entertainment company that's rewarded investors many times over in the past. It was crushed by the pandemic, but it's making a comeback. It's likely to be only a matter of time until it's bigger and better than ever. But can it grow your money 10 times or more going forward?
The magic of Disney
It's hard to compete with Disney, the largest entertainment company in the world. It has the largest media library, full of popular franchises that it uses over and over again in sequels, remakes, series, products, and theme park rides. Despite what happened over the past two years, when parks shut down and movie theaters closed, it retained these assets.
Image source: Disney.
Disney recently reported earnings for the first fiscal 2022 quarter (ended Jan. 1). Revenue increased 34% year over year to a record $21.8 billion, just edging out the 2020 number. Earnings per share (EPS) were $1.06, up from $0.32 last year, but still below 2020's $1.53.
But it's more than the actual numbers that tell the story. First of all, Disney managed this excellent performance despite ongoing travel restrictions and some lingering capacity restrictions and closures at parks and experiences. In fact, parks and resorts posted record revenue. Some of the delay in income catching up to revenue growth was due to extra expenditures to meet government regulations for safety and hygiene.
Then there's streaming. Disney+ launched fortuitously before the pandemic hit American shores and was a savior for the company when parks were closed and posted no sales. A little over two years later, Disney+ has hit nearly 130 million subscribers, and total subscriptions including Hulu and ESPN+ were more than 196 million. That was due to organic growth, fresh content, and launches in new markets. Disney+ still has many new markets to enter, and CEO Bob Chapek said that the company is on target to reach 230 million to 260 million subscribers by 2024.
Disney released several highly anticipated films in the first quarter, including Spider-Man: No Way Home, and the animated film Encanto. Its robust multi-channel network, which includes theater releases, streaming, and traditional TV, gives it plenty of leverage to work its titles into money-generating engines.
So what should we expect this year? The film release schedule should pick up now that production is back to mostly normal. Parks and experiences are also for the most part operating without the capacity limitations that plagued them for the past two years. Those two segments should look a lot better in 2022. Streaming should continue to expand its subscriber count, and Disney will release lots of new content to its streaming networks.
NYSE: DIS
Key Data Points
The magic of compounding
Disney has grown investors' money more than 10x in the past, but over a long period of time. If you invested 30 years ago, you'd have seen your investment grow about 1,000% before the pandemic started. It's been up and down since then as the company gets itself back together and forges a path forward.
There are so many reasons to be confident about Disney's future. It's celebrating its 100th year as a company, and Chapek said: "Performance like this, coupled with our unmatched collection of assets and platforms, creative capabilities, and unique place in the culture give me great confidence we will continue to define entertainment for the next 100 years."
Will it take another 30 years for the stock to grow 10 times? It could. If you're looking for quick gains, Disney's probably not your stock. But if you have time to let your money compound and work for you over time, Disney is a no-brainer stock that should demonstrate strong growth as compared to the market for many years.
