Investing in Walt Disney (DIS -0.01%) stock looks like a smart choice in today's market.
Disney is a strong growth company with a timeless portfolio of content, characters, and intellectual property (IP), which is being monetized through various revenue streams. Their streaming service has a large subscriber base with potential for profitability. The return of CEO Bob Iger may lead to a refocus on intellectual property and cost reductions, most likely resulting in stronger earnings over time.
Let me show you why the House of Mouse is such a brainy pick right now and why you'll appreciate owning it for decades to come.
The magic behind Disney's diverse business
First, let's take a closer look at what makes Disney such a unique and valuable company. With a portfolio of iconic content, characters, and brands like Disney, Marvel, Pixar, and Star Wars, there's no doubt that Disney has established itself as a leader in the entertainment industry. This vast collection of intellectual property gives the company a competitive edge, allowing it to generate multiple streams of revenue from each property. Whether it's through theme parks, merchandise sales, movies, or streaming services, Disney has found ways to monetize its content in innovative and effective ways.
It's also important to note that Disney's revenue streams are constantly evolving, and this has been a big driver for the stock over the past year. Despite the changing landscape of the entertainment industry, Disney's timeless IP and adaptability have allowed the company to stay relevant and grow its business.
Robust financial results
Another key factor to consider is Disney's solid business fundamentals. In the fiscal year 2022, ending Oct 1, Disney collected revenues of $82.7 billion. Most of those sales came from the media and entertainment segment. This includes linear television, streaming services, movie releases, and content licensing. Disney's portfolio of linear TV channels, including ABC, Disney, ESPN, Freeform, FX, and National Geographic, generated $28.3 billion in sales and $8.5 billion of operating income in 2022.
The company's streaming service has also been a major contributor to its overall growth, posting $19.6 billion in revenue in 2022. Despite losses of $4 billion due to heavy spending on content and marketing, Disney has managed to amass over 160 million Disney+ subscribers, 24.3 million ESPN+ subscribers, and 47.2 million Hulu subscribers.
It wouldn't be fair to construct a total viewer count by adding these categories up because there is plenty of overlap where one household subscribes to more than one of Disney's streaming services. Still, the company clearly boasts more than 160 million customers here, not too far behind global market leader Netflix (NFLX -0.20%) and its 231 million names.
In addition to its media and entertainment segment, Disney's Parks, Experiences and Products segment also accounts for a significant portion of the company's revenue. This includes all proceeds from theme parks, resorts, cruises, and merchandise sales, which generated $28.7 billion in revenue and $7.9 billion in operating profit by 2022. This diverse business model shields Disney from sudden shifts in any single market and also presents opportunities for cross-selling its intellectual property across many different business operations. Nobody sells character-themed hotel rooms, Caribbean cruises, hoodies, action figures, and lunch boxes quite like Disney.
Of course, there are also challenges facing Disney in the current market. The film and linear TV industries are facing a lot of uncertainty, and the streaming business is rapidly changing. Despite these difficulties, Disney's foundation of content, characters, and intellectual property makes it likely to continue growing and adapting to new challenges.
DIS Revenue (TTM) data by YCharts.
Walt Disney is no Mickey Mouse stock
There are many good reasons why it's smart to buy Disney stock today.
One is the potential for a refocus on inspiring intellectual property and cost reductions, which should lead to stronger bottom-line earnings over time. With the return of CEO Bob Iger, there is speculation that the company may take a more aggressive approach to defending its position in the market. Quite frankly, I can't think of an industry legend I'd rather have in control of Disney at this game-changing crossroads in the history of media and entertainment.
Another reason to consider buying Disney stock is the long-term growth potential of its streaming service. With over 160 million Disney+ subscribers, the company has established itself as a streaming powerhouse in just three years. The losses should turn into profits over time, much like Netflix is doing after essentially pulling the video-streaming industry into existence by the bootstraps.
Finally, Disney's content, characters, and brands are iconic, timeless, and (above all else) profitable. With the ability to monetize its IP through multiple revenue streams, Disney has proven that it is a relentless growth company that is not easily defeated.
So there are several compelling reasons to consider investing in Disney stock today. Whether you're more inspired by the company's vast portfolio of intellectual property, solid business fundamentals, or long-term potential for growth, there's no denying that Disney is a force to be reckoned with.
Meanwhile, share prices are down 23% over the last year, the stock is back where it was five years ago, and trailing sales are up by 45%. Yes, Disney's profits are down, but the company is building a brand new revenue platform that could support generous earnings and cash flows in the long run. The strategy shift just needs some time, and it's smart to build your ownership in Disney's world-class business while the stock is on fire sale.
