Watching Walt Disney (DIS -2.12%) stock over the last three years has been like attending a long, drawn-out ping-pong game. Every time there's a positive development, the stock jumps. But after all the nit-pickers have processed any earnings results and found them slightly lacking, it slumps back down. Sadly for shareholders, the current result of that cycle is another move lower, with the shares down 8% since the company's second-quarter earnings report last week.

May is an important month for Disney, and not just because of the earnings report. In fact, depending on how the rest of the month goes, the stock could rise back up.

1. Mixed earnings results disappoint investors again

Disney is a huge, multi-pronged business with various interconnected segments. When everything works together the way it's supposed to, investors cheer. But when one business doesn't perform quite so well, that's what investors typically focus on.

But the benefit of having different segments, where the success of one (or a few) can make up for underperformance in another, shouldn't be lost on investors, either. That's what's been happening at Disney lately. There hasn't been a time over the past three or so years when all of the parts have been working smoothly, which is why Wall Street hasn't embraced Disney stock recently. But maybe it should.

The fiscal 2023 second-quarter report (ended April 1) was more of the same. Revenue rose a very respectable 13% over last year, and earnings per share (EPS) from continuing operations increased from $0.26 to $0.69. EPS minus certain items, which is the EPS Wall Street tracks, fell from $1.08 last year to $0.93.

Most of the good news came from the parks segment. Parks revenue grew 17% over last year to $6.7 million, while media revenue increased 3% to $13.6 million. The disparity was starker in profitability. Parks operating income jumped 23%, while media operating income fell 42%.

The media segment includes streaming, film production, and linear networks. Of those, streaming income actually improved versus last year, from a $887 million loss to a $659 million loss. The decline stemmed from linear networks, as well as turning from a profit to a loss in content sales and licensing. As advertisers move toward streamers, traditional networks are struggling with declining ad sales.

The main gripe investors had with the report, though, was the loss in streaming subscriptions. Disney+ subscribers fell by 4 million, mostly through the Disney+ Hotstar bundle in India. Disney+ core subscribers actually grew, and there were increases in both ESPN+ and Hulu.

Is this an overreaction? Maybe. Most of Disney's business looks very healthy, and CFO Christine McCarthy stressed the improvement in the streaming losses. Management often reiterates that streaming growth won't be linear. So far, investors aren't impressed.

Let's get to the next reason why May could be a big month.

2. Hoping for another hit

Disney released the original The Little Mermaid in 1989, the first of the modern Disney princess films, and it spawned a huge franchise of mega-animation films. It is releasing a live-action remake on May 26, and hopes are high for a smash hit. 

That's what Disney does best. It has an unbeatable creative team cranking out content, and it often recycles previous hits or makes sequels, prequels, series, and more based on popular characters and content. It populates its streaming channels with this content, often based on these hits, and also uses them as inspiration for theme rides and products. 

Two films it has released so far in theaters this year via Marvel Studios were both sequels: Ant-Man and the Wasp: Quantumania and Guardians of the Galaxy Vol. 3. Disney also just debuted a new live-action version of Peter Pan, and another installment of Indiana Jones is coming out later this year.

The Little Mermaid had its premiere in Los Angeles, and reviews have been mixed. But it will all boil down to ticket sales. High sales are likely to lift Disney stock, but poor sales will negatively impact it once again.

Investors who are on the fence should keep in mind that out of 30 Wall Street analysts who follow Disney stock, 21 rate it a buy, two rate it outperform (one step up from buy), and seven rate it a hold. None rate it a sell. As for price targets, not one of them sees the price falling from where it is over the next 12 months, and the highest target is 60% above where it is today.

May will be a big month, but in the long term, Disney is a powerhouse company with solid prospects.