With so many unknowns, it's understandable why investors seem nervous in today's market. But for those patient enough to invest for the long haul, broader market declines can offer buying opportunities.
Walt Disney (DIS 0.16%) and UnitedHealth (UNH 1.61%) are two monster companies set to weather the current storm well. Entertainment giant Disney is storing up content reserves to help rebound from pandemic setbacks. UnitedHealth continues to demonstrate unwavering strength even as other stocks flounder. The future looks extremely bright for both of these innovators, and investors should have no hesitation taking advantage of the opportunity presented by each.
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The case for Disney
Despite being down about 30% from its all-time high of $196 set about a year ago, Disney is gearing up for a great year. Loosened COVID restrictions allowed parks to open at full capacity in 2021, bringing in revenue that had essentially evaporated at the start of the pandemic. On the content side, Disney's streaming services saw impressive growth in 2021, and a promising content pipeline has investors anticipating further expansion in the near future.
Subscriber growth surged across all of Disney's streaming services. Disney+ and ESPN+ respectively increased subscriptions by 60% and 66% in 2021 compared to the year prior. Hulu reported slower growth but still improved upon 2020's numbers, with 20% more subscriptions than last year. To continue these trends, the company announced that it will offer a new, ad-supported subscription option later this year to attract an estimated 100 million additional Disney+ subscribers.
Disney is preparing to bulk up its content catalog through major media partnerships. A multi-year agreement with Sony Pictures will run from 2022 to 2026, bringing fan favorites Spider-Man and Jumanji to the Disney+ streaming platform. While these future films will not exclusively be available on the Disney+ platform -- they'll be released in theaters and on-demand before also becoming available on Disney+ competitor Netflix -- investors should still reap the long-term benefits of new subscribers brought to the platform by these beloved franchises.
The next two years are also already chock-full of original Disney content from historically high-grossing series. Disney's superhero outpost, Marvel, is set to release six new sequels between 2022 and 2023. These sequels see repeated success: the Thor series, which is due for another installment this year, has increased revenue by an average of 37% with each new film. Other popular franchises like Toy Story and Star Wars are slated to release new films and streaming series, sure to further increase Disney+ subscriptions.
A pick-up in park attendance, adjusted subscription options, and new content should all contribute to continued revenue growth. What's more, these tactics will increase merchandising and offset headwinds from inflationary pressure and the broader market decline. The House of Mouse should not stay down for long; right now could be a great time to invest in this visionary entertainment company.
The case for UnitedHealth
UnitedHealth has evolved from an insurance and benefits provider into a massive one-stop-shop of integrated healthcare services. The company's primary divisions are UnitedHealthcare, the insurance arm, and Optum, which manages a host of healthcare services through various business units.
Optum's side of the company is strong, as evidenced by revenue growth across segments. OptumInsight, which provides data analytics, consulting, and other business services to governments and healthcare providers, enjoyed 25% earnings growth last year. OptumHealth utilizes a value-based pricing strategy, charging patients according to the success of care rather than the services performed. This resulted in 30% revenue growth per consumer in 2021. UnitedHealth expects to bring in 500,000 new patients with the value-based model, setting the stage for a magnificent 2022.
The insurance side of the business, UnitedHealthcare, saw 11% revenue growth in 2021. An influx of new Medicare and Medicaid plan customers led to 2021 growth and is expected to continue through this year, as an estimated 600,000 new members enroll in Medicare Advantage. To address the aging population, UnitedHealth expects to bulk up Medicare spending by a projected 7.6% compound annual growth rate through 2028.
Despite the company's financial strength, investors may be wary about UnitedHealth's intention to acquire Change Healthcare as part of its strategy to bolster its data analytics services. That acquisition has been met with a challenge from the Department of Justice; a trial is scheduled to start on Aug. 1. While the suit could bring some damage to UnitedHealth's stock price, a projected 2022 cash flow of $24 billion should fund continued growth and help the company rebound from temporary dips.
UnitedHealth's stock price has been on an upward trajectory for the majority of the past 10 years, and its price-to-earnings (P/E) ratio is in line with the industry's average. The company estimates an earnings-per-share growth rate of 13% to 16% per year, far above the healthcare industry's projected 5% annual profit growth. Make no doubt about it: UnitedHealth is a monster stock for long-term investors to buy and hold.
