From 2005 to 2020, Bob Iger helped to transform Walt Disney (DIS 0.89%) into a media colossus. Iger spearheaded Disney's acquisitions of Pixar, Marvel, and Lucasfilm, which brought popular franchises like Toy Story, The Avengers, and Star Wars under the company's expansive umbrella.
After a short stint of "retirement," Iger is now back at Disney's helm. His current mission is to bolster the entertainment giant's sagging profits, and he's likely to do just that. Here's why you might want to buy Disney's stock now, before Iger begins to work his magic.
From losses to profits
Disney's streaming subscriber growth is impressive. The company ended its fiscal 2022 on Oct. 1 with over 164 million Disney+ customers, along with an additional 47 million subscribers for Hulu and 24 million for ESPN+. For context, Disney's total of 235 million streaming subscribers surpassed that of Netflix, which ended the third quarter with roughly 223 million members.
That said, Disney's streaming operations have yet to produce a profit. The division has racked up billions of dollars in losses, due largely to Disney's heavy investments in content and technology. Yet recently enacted price increases and a new advertising-supported offering should help Disney+ reach profitability in fiscal 2024. Iger is also working to restructure the business to reduce costs, which should make it even more likely that streaming will become another powerful driver of long-term profit growth for the company by that time.
A rebound in travel demand
Disney's highly profitable parks and resorts have more than offset its streaming losses. Revenue in the company's parks, experiences, and products division surged 73% year over year to $28.7 billion in fiscal 2022 as COVID-related restrictions were lifted. The segment's operating income, in turn, increased more than sixteenfold to $7.9 billion.
Traffic at Disney's theme parks, resorts, and cruise ships should continue to head higher in 2023 as COVID fears subside. At the same time, price hikes are likely to bolster the segment's already impressive profitability.
Disney's stock is on sale
The share prices of many high-quality companies are down sharply in the current bear market. Unfortunately, Disney has not been spared the carnage. Its stock price is down more than 40% over the past year.
But these steep price drops allow bear markets to create tremendous bargains for investors. We have one such opportunity with Disney today. Its shares can currently be had for less than 22 times its projected earnings per share in fiscal 2023. That's a great price for a business with an unrivaled collection of assets that analysts forecast to grow its per-share profits by nearly 24% annually over the next five years.
Disney could deliver handsome gains to investors in 2023
Continued subscriber gains, progress toward streaming profitability, and rising profits at Disney's parks and resorts could all help to drive the entertainment giant's stock price higher in 2023. Combined with investors' well-deserved confidence in Iger's leadership, these positive trends could also result in a higher price-to-earnings (P/E) ratio for Disney's shares.
Solid earnings growth, together with the potential for P/E multiple expansion, is a powerful formula for shareholder gains -- and Disney's investors appear set to enjoy just that in the year ahead.
