There is always a lot going on at Walt Disney (DIS +0.15%), but these days, the level of chatter about it is off the charts. The media giant seems to be making a lot more headlines, and that isn't necessarily a good thing. Between Disney dividing its fan base by getting vocal about controversial topics and fears of what a global economic slowdown would do to its theme parks and ad-dependent broadcasting outlets, there's a lot to unpack here.
The stock has lost half its value since it hit its 52-week high, a worse decline than many of its entertainment peers have endured. Can the company overcome its recent setbacks? Will its shares recover? Let's take a closer look at why everyone is talking about Disney -- and consider whether this story could have a fairy tale ending for investors.
Image source: Disney.
A whole new world
Disney naturally took a financial step back during the early stages of the pandemic. It had to close all of its theme parks, and it took between four months and nearly 14 months before it was able to reopen them. Film productions were delayed, and even when cameras started rolling again, folks still weren't showing up at their local multiplexes. Sporting leagues were upended, putting a dent in the appeal of Disney's majority-owned ESPN.
The shining star for the media empire during those early days of the COVID-19 crisis was Disney+. The streaming service's subscriber numbers catapulted skyward immediately following its late 2019 launch. However, even Disney+ has lately experienced some growing pains as subscriber growth has slowed after its frenzied freshman year.
NYSE: DIS
Key Data Points
Right now, Disney isn't firing on all cylinders. The movie studio titan that delivered all of the six highest-grossing films in the U.S. in 2019 holds just one of those slots so far in 2022. Lightyear, which debuted last month, was a theatrical dud, a result that further stoked the chants of "go woke, go broke" from conservatives. Advertising stocks have also been hit hard in the wake of recessionary concerns, taking Disney's media networks juggernaut with it. Cord-cutting continues to chip away at the viewership of Disney's cable channels, and while major sports are back in full swing (pun intended), that also means programming expenses for ESPN are on the rise.
Where the magic still sparkles
What is working for Disney right now? Let's start at the turnstile. Disney's domestic theme parks are delivering record revenues and operating profits. Higher prices may be thinning out the crowds, but that's by design, as the world's largest theme park operator is making a lot more money per guest at its gated attractions. Disney+ is also gaining momentum again.
The near-term and long-term outlooks are even better. It shouldn't take long for Disney to overcome the ho-hum box office returns of Lightyear, The Bob's Burgers Movie, and Death on the Nile. Marvel's Thor: Love and Thunder opens Thursday night, and it's highly likely to win Disney a second slot among this year's top six box office draws before the end of this month. Will that be enough to turn "go woke, go broke" into "wide awake, catch a break"? We'll see. U.S. theaters just had their best weekend since late 2019.
Disney's theme parks should continue to build on their reopening successes, barring a global economic meltdown that saps consumers' capacity to spend on leisure travel. The appetite for entertainment is only growing across streaming services and networks, and no other media company's arsenal of intellectual properties comes close to that of Disney.
Analysts are anticipating healthy growth for Disney. Revenue rose by a mere 3% in its fiscal 2021, but the Wall Street pros' consensus is for a 39% top-line bounce this year, followed by another double-digit percentage increase in fiscal 2023. Management may even revive the stock's dividend before long. Disney remains one of the more well-rounded media companies in the investing universe, and its depressed share price seems more like an opportunity than a warning sign. Disney may have become a conversation starter at parties even for non-investors, but it could also emerge as a leader of the next market rally.
