It's fair to say that many next-gen traders fancy speculative and low-priced growth stocks over blue chips. It's part of the art when you're swinging for the fences. However, you may be surprised to learn that Walt Disney (DIS +2.03%) is one of the 10 most widely held stocks on the Robinhood Markets (HOOD +3.50%) platform.
It makes sense. Disney reaches a wide audience. Its animated classics have been a family entertainment staple over several generations. It operates the most-visited theme parks in the world. Its Marvel and Lucasfilm content is responsible for many of the top box office draws of all time. It's a juggernaut for sports programming with ESPN. Let's dive into why Disney could crush the market in the long run.
Image source: Disney.
Building a better mousetrap
Only Disney could take a streaming service -- in this case, Disney+ -- from zero to 164.2 million subscribers worldwide in less than three years. It has an unmatched vault of content as well as the marquee franchises to whip up new spin-offs. It's true that market sentiment has shifted when it comes to Disney+. Investors have gone from marveling at the platform's brisk ascent to fearing its mounting losses. However, help could be on the way.
At his first town hall with employees on Monday, returning CEO Bob Iger emphasized that he will prioritize profitability over sheer subscriber growth in the future. The media giant's direct-to-consumer segment, helmed by Disney+, posted a brutal $1.5 billion operating loss in its latest quarter, nearly wiping out the $1.7 billion operating profit from its legacy linear networks division.
NYSE: DIS
Key Data Points
The market and Disney enthusiasts have applauded Iger's return, but he realizes that he can't go back to a pre-pandemic operating climate. The hiring freeze announced by outgoing CEO Bob Chapek just before he was sent packing will remain in place. The upcoming 38% price hike for Disney+, which goes into effect next week, isn't going away. Theme park moves that have seen per capita spending soar 40% over the past three years aren't going to be completely reversed. The CEO needs to grow revenue and control costs to get Disney stock back on track.
You don't want to bet against Iger and Disney. You also have to love the starting line. Disney doesn't trade in the double digits often, and it would have to more than double to get to the all-time highs it hit early last year. Spoiler alert: Outside of the widening losses for its streaming services, Disney is in much better shape now than it was in March of last year. Its theme parks are brimming with guests paying a premium for the experience. It's had the top movie at the corner multiplex for the last three weekends. Its pipeline of new movies, shows, and theme park attractions should keep customers worldwide flocking to the Disney brand.
There's no denying that Disney is the media stock that other entertainment moguls aspire to become when it comes to breadth of content. The stock is depressed at current levels, and Iger has a lot to do in his two-year stint as returning CEO to turn the House of Mouse back into a home. You have to like his chances. If he can get sentiment back where it was early last year, it would mean the shares had doubled during his tenure. There are plenty of investments that Robinhood traders believe will beat the market, but the best one could be one of the largest they already own.
