Shares of Walt Disney (DIS -0.58%) hit another three-year low on Wednesday. It won't take much for things to get even worse. The stock is a 1% dip from nabbing a nine-year low.
The bears are everywhere now. Will their growling get even louder in the year ahead or is this a great opportunity to buy into the media bellwether at a historically low price? Let's take a look at where Disney -- and more importantly its shares -- could be a year from now. Spoiler alert: Disney still has time for a fairy tale ending.
It's a small world after all
Disney's fiscal year ends over the weekend. It's fair to say that it's been a disappointment. Revenue and earnings growth should essentially clock in flat for all of fiscal 2023. The year ahead should be different. Analysts see revenue and earnings per share rising 5% and 32%, respectively.
Disney is trading for a reasonable 17 times forward earnings. It's a bargain if Disney can live up to -- if not exceed -- expectations. It's a trap if fiscal 2024 winds up being a replay of this fiscal year, since Wall Street initially figured that it would be a year of growth on both ends of the income statement.
Image source: Disney.
The return of Bob Iger as CEO last November initially sparked optimism, but it didn't last. It's easy to see what tripped Disney up this ill-fated fiscal year. Disney had several high-profile theatrical releases disappoint at the box office. Its legacy networks business continues to contract in the wake of cord-cutting and a weak advertising market. Operating losses are finally starting to contract for its direct-to-consumer streaming segment, but subscriber growth has stalled through fiscal 2023. Disney's theme parks business has been resilient since reopening after pandemic-related closures, but its domestic attractions have experienced a year-over-year slowdown in traffic since April.
The coming year should be more conducive to upticks. Disney is already expected to resume its dividend after a four-year break in the next three months. The payout won't be much in this climate of high money market yields, but the return of regular cash distributions to shareholders should help Disney get back on the radar of income investors. Iger's cost-cutting plan that should eventually shave more than $5.5 billion in annual expenses should improve margins, including turning Disney+ into a profitable segment by the end of the new fiscal year.
Disney's slate of theatrical releases for 2024 isn't necessarily more impressive than this year's lineup. Hollywood production strikes created a ripple in the pipeline, but expectations are low enough after a very mortal 2023 that the ceiling is now higher than the floor is lower. Disney's legacy networks business may not see much of a boost beyond a potential turnaround in the TV advertising market, but investors may cheer any potential asset sales in this space.
This isn't Disney at its best. The stock is another down day away from hitting its lowest point since 2014. However, this is still the class act among media stocks. Entertainment itself isn't going out of style, and Disney appears ready to resume its market dominance with a content catalog and ecosystem that is unmatched in the industry.
A whiff of optimism could increase profit projections as well as the multiple that investors are willing to pay to own the House of Mouse. Disney was a blue chip laggard in fiscal 2023, but the year ahead offers a clearer path to deliver market-besting returns.
