It hasn't been great to be a Walt Disney (DIS 1.54%) shareholder over the past few years. Disney stock has actually lost around 10% over the past five years. That's disappointing for a powerhouse company that owns tremendous sales-generating assets.
The stock has been up and down over the past few years as the company struggled with closed parks and now unprofitable streaming. Investors sent Disney's stock price down again after its second-quarter earnings report last week, but the report was more mixed than negative. Let's go through what investors saw, what they ignored, and how Wall Street is assessing the overall picture.
The largest entertainment company in the world
Disney operates several segments. Right now it has them condensed into two parts: parks and media. Disney reported four segments until the pandemic, when management restructured to account for the new streaming business. Newly returned CEO Bob Iger said he would change that again to give creators more control over their material, rather than have their work streamlined under management, but so far, it's still reporting under these two segments.
The parks segment is fairly straightforward and comprises revenue from the company's 12 global theme parks as well as other experiences such as cruises and resorts. It also includes products.
The media segment is everything else, which is mostly films and networks. Networks are the traditional television networks and cable, and the streaming networks are included as direct-to-consumer sales.
Disney posted a 13% year-over-year sales increase in the 2023 second fiscal quarter (ended April 1), finally outdoing its 2019 numbers. Yes, it took this long, even though year over year it has been improving since 2021.
DIS Revenue (Quarterly) data by YCharts
Streaming accounted for more than a quarter of sales and increased 12% over last year, so at this point, it's incredibly important to the top line. The parks segment sustained a real rebound and grew 17% over last year, more than the media segment's 3% increase, but accounted for only about a third of total sales.
Parks operating income grew 23% over last year as Disney was able to raise ticket prices as well as many related services. Media operating income, however, fell 42% from last year, driven by falling ad sales at traditional networks as well as streaming losses. Disney is trimming these losses, according to its plans, but they still came in at a hefty $659 million.
Even worse, Disney+ lost 4 million subscribers in the second quarter. It looks like that was mostly attributable to losing the rights to certain sports coverage in India, and some of it came from a raise in the Disney+ subscription price in certain areas.
What does Wall Street think?
Wall Street forecasts give a short-term picture of where analysts think a stock is headed in the next 12 months. The forecasts are often widely divergent, so investors need to take any one with a grain of salt.
When people talk about Wall Street's "consensus," it's far from a real consensus, but more of an average of what could be very different views, which provides limited benefit. Sometimes, though, you can glean a thing or two about a stock.
In the case of Disney stock, there are 30 covering analysts. Twenty-one rate Disney stock a buy, and the rest rate it outperform (a step above buy) or hold. Not one rates it a sell, so there's some consensus there.
As for a 12-month price target, they range from a 1.2% increase to a 58.3% increase. That's also telling, because more frequently, there's at least one pessimist who gives a price target that's lower than the price today.
Wall Street uniformly sees upside for Disney stock this year. That's at the very least a vote of confidence for the short term, and it signals that Disney's stock price has fallen too low considering its valuable assets.
But that's just the short term. Disney is demonstrating improvements in sales and profitability, and it has a huge future ahead as the global leader in entertainment.
