Disney (DIS +0.05%) is a much different company than it was at the start of 2022, and odds are good it'll look a lot different at the end of 2023 than it does today.
Disney's now operating under a new CEO -- its old CEO. It also became the biggest streaming video company in the world by subscriber count. And the theme park business came roaring back to life over the last 12 months.
As we turn the page toward 2023, here are four Disney predictions for investors.
1. 275 million streaming subscribers
Disney could add another 40 million subscribers to Disney+, Hulu, and ESPN+ in 2023.
The company is promising to put a greater focus on turning a profit from its streaming business in 2023. While it may be raising prices and curbing content expense growth, increasing its subscriber base will still play a big role in the path toward profits.
Importantly, Disney is still expanding Disney+ to new geographies. Even at 103 million core (non-Hotstar) subscribers, there's plenty of room for growth. Netflix has over 220 million subscribers, and it has a very small presence in India (where most Disney+ Hotstar subscribers live).Disney's new pricing structure in the U.S. makes the Disney Bundle, which includes Hulu and ESPN+, even more attractive to consumers. There's clearly a push by management to drive bundles, as it improves subscriber retention.
In total, investors should expect strong subscriber growth and moderate content expense growth as Disney pushes toward profitability.
NYSE: DIS
Key Data Points
2. Billion-dollar box office releases remain elusive
Disney has several contenders for its next billion-dollar release following Avatar: The Way of Water, but it's possible none of them reach the milestone.
The Marvel Cinematic Universe enters Phase 5 at the start of the year with the next installment of Ant Man. It'll continue in the summer with the third entry in the Guardians of the Galaxy series. Both could be box office hits, and $1 billion in ticket sales isn't totally out of the question for either. But that would be surprising.
Disney's best shot at a $1 billion release is The Little Mermaid. Live-action remakes have proven a successful formula in the past -- both 2019 releases topped $1 billion. But it'll take a lot to drive $1 billion in ticket sales for a film that isn't chock-full of action scenes that must be experienced on the big screen for full effect.
Disney's 2023 films could do a lot better at the box office than its 2022 slate, but a billion-dollar release might not materialize. Importantly, though, they may play an important role in driving subscribers to Disney+ and keeping them subscribed throughout the year.
3. Disney parks continue their recovery
Disney's parks and experiences revenue grew 73% in 2022, fully recovering back to 2019 levels. Investors should expect Disney to build on that growth in 2023 (albeit at much more modest rates).
Disney's celebrating its 100th anniversary and holding events at the parks in the winter and spring. It'll have special decor and food and new attractions to unveil for diehard Disney fans. The milestone could attract better-than-average attendance throughout the year.
Disney appears to be increasing capacity at its parks, opening new and temporarily dormant rides. Disney's Shanghai park is now fully open for business, too. That should drive incremental revenue over 2022 when it was more restricted by China's COVID-19 policies.
One of the big factors driving revenue in 2022 was changes to park pricing and the Genie+ program. While CEO Bob Iger may look to make the experience more user friendly for guests, investors and fans shouldn't expect him to roll back the changes pushing revenue per guest higher.
Countering those trends is that many consumers are cutting back on discretionary spending amid economic uncertainty. If we enter a full-blown recession, that could significantly curtail park attendance.
Nonetheless, investors should expect parks and resorts to remain a strong source of operating profits in 2023 barring any unforeseen public health setbacks or significant downturn in economic activity.
4. The stock price climbs
Disney's stock price is trading at an immense value right now, and investors would be smart to grab a few shares.
Disney's price-to-sales ratio hasn't been this low in the last decade. Shares currently trade at less than 2 times revenue. But the company is poised to grow revenue and produce significant operating leverage in parks and streaming over the next few years.
DIS PS Ratio data by YCharts
It's possible Disney's stock continues to move lower from here, but the odds are good it produces the financial results that push the stock higher in 2023. At the very least, long-term investors shouldn't be upset if they get into the stock at today's price.
