The last couple of years haven't been easy for Walt Disney (DIS 1.45%) investors, like me. Shares of the iconic entertainment stock barely matched the market in 2024, only to fall short every year outside of that since 2020.
This year has been more of the same. Disney shares have risen 3% in 2025 heading into the final trading day of the year. The market has soared 17%. I know that the past few years suggest that momentum isn't on the side of the House of Mouse, but I disagree. Here are some of the reasons why I believe that Disney stock will break out and beat the market in 2026.
Image source: Disney.
1. Content is king again
This past year has been a wild last dance at a Sadie Hawkins party. Warner Bros. Discovery (WBD 1.33%) began the year with a market cap of $26 billion. Its value has roughly tripled as a bidding war broke out for the media stock, following an earlier bidding war for a rival platform that concluded over the summer.
Warner Bros. Discovery looks like it's going to be bought out at roughly half of Disney's enterprise value. Disney is more than twice the company that Warner Bros. Discovery will ever be. What does Disney own? The easier question is to ask what the massive empire doesn't own. It's unlikely that Disney becomes the target of a bidding war in 2026, but the value of what it owns just got a whole lot better this year.
NYSE: DIS
Key Data Points
2. Disney still owns the multiplex
Disney's studio business got off to a sleepy start in 2025. Some of the year's biggest hits, like A Minecraft Movie and Sinners, were released by other studios. Its own live-action Snow White was a box office dud. It all worked out in the end.
Outside of China's Ne Zha 2, Disney will have put out the only three movies in 2025 that would go on to top $1 billion in ticket sales worldwide. The live-action Lilo & Stitch and Zootopia 2 are already there. Avatar: Fire and Ash will outsell the two of them by the time it completes its theatrical run.
This isn't a fluke. Disney had the only three movie releases of 2024 that surpassed $1 billion apiece in global box office receipts. Expect more of the same in 2026. Disney's Avengers: Doomsday is widely predicted to be the top draw in the year ahead. Other notable Disney releases in the new year include The Mandalorian and Grogu as well as Toy Story 5. Never bet against a proven hit factory.
3. It's a small world, but it keeps getting bigger
Disney's experiences segment was expected to face a major challenge in fiscal 2025 with the springtime opening of Comcast's (CMCSA 1.37%) Epic Universe. Would the first major theme park to open in the U.S. -- minutes from Disney World in Florida -- leave a dent on the world's largest operator?
It doesn't seem that way. Disney's experiences segment -- helmed by its gated attractions and cruise line business -- saw its revenue and segment operating income rise 6% and 8%, respectively. The new year should be even better. Since the end of Disney's fiscal year in September, its cruise line introduced the bar-raising Disney Destiny in November. The maiden voyage for Disney Adventure -- its largest cruise ship -- is now just a couple of months away. A major expansion at its theme parks worldwide leaves Disney with a pipeline of new experiences that will be rolled out over the next few years.
4. The financials keep getting better
If you think Disney stock disappointed in 2025 because the business took a step back, think again. Disney's revenue rose a modest 3% to $94.4 billion in fiscal 2025, but the story was even better on the bottom line. Adjusted earnings per share rose 19%. Free cash flow improved 18%.
Disney's streaming business turned profitable midway through fiscal 2024. This has helped give Disney+, Hulu, and the recently launched ESPN Unlimited the flexibility to soar without impeding the overall company. Disney reinstated its dividend at the start of fiscal 2024 and has since raised it three times. Disney is back, even if the five-year chart says otherwise.
5. Disney is cheaper than you think
With so many moving parts -- led by its flagship content business that just saw a rival get bid up to 3 times what it was worth a year ago -- you would expect Disney to be richly valued. Here is where that uninspiring stock chart of the past few years starts to pay off.
Disney is trading for a reasonable 17 times this fiscal year's profit target. It's fetching a little more than 15 times next fiscal year's earnings. You can snag the global leader in entertainment at an attractive valuation, heading into a future that should include a lot of Disney consumption by the world. It's how a fairy tale ends, and this is your compelling starting line.
