The New Year Is Almost Here and Disney Has an Exciting Present for Shareholders

Shareholders of Disney (DIS) have been feeling the pressure of disappointing stock performance for several years. However, a positive shift has recently occurred, with Disney stock seeing a 16% increase in the last month. As we approach 2025, this is a welcome change for investors.

Furthermore, Disney has announced a significant dividend increase of 33%, raising it to $1 per share. This signals that the company's financial situation is improving, sparking questions about whether it's a good time for new investors to enter.

Looking at the Current Situation

Despite recent gains, it's important to remain cautious; Disney's stock is still down 42% from its five-year highs. Investors are regaining some optimism, but there's still much work ahead to rebuild market confidence.

CEO Bob Iger appears to understand the necessary steps for turning Disney around, although many changes were in progress before his return two years ago. The company has seen revenue increases, parks performing well, and notably, streaming services are now profitable.

In the fourth quarter of the fiscal year 2024, Disney reported a 6% year-over-year increase in sales, along with a remarkable 79% rise in earnings per share (EPS) to $0.25. While theme park revenue grew only 1%, the entertainment segment, which encompasses all Disney media, surged by 14%.

Disney's streaming service achieved its first profitable quarter with an operating income of $321 million. This success follows the earlier profitability of the entertainment streaming segment, which excludes sports. The growth of Disney+ Core subscriptions, which jumped by 4.4 million to reach 122.7 million, helped this milestone, aided by the introduction of an ad-supported tier and a 14% increase in streaming ad revenue over the year.

Including Hulu, the total entertainment streaming subscriptions reached 174 million. With these developments, the market reacted positively to Disney's strong quarter, reflected in its recent stock gain. Yet, all aspects of the business must work harmoniously to sustain this momentum.

While the revenue growth is a step in the right direction, it's worth noting that it wasn't outstanding, and profits, though improving, still have a long way to go. Current net income is still 37% below what it was a decade ago, highlighting the importance of continuing the profitability trend in streaming and management’s profitability projections extending to 2027.

Looking forward to 2025, Disney anticipates that adjusted EPS will grow in the low-single digits, while entertainment streaming operating income is expected to more than triple. Positive forecasts extend into 2026 and 2027 with anticipated double-digit growth for both adjusted EPS and entertainment streaming operating income.

Disney's Future Prospects

There are several reasons to feel optimistic about Disney’s future. The company released two of the year's top films, Inside Out 2 and Deadpool & Wolverine, both of which have remained at the top of the box office, despite strong competition from other studios like Comcast's Wicked. Additionally, the recent release of Moana 2 has shattered records, achieving the highest-grossing Thanksgiving five-day opening and ranking at No. 5.

Every film released by Disney adds value as they can be monetized through multiple channels, including parks, streaming platforms, and merchandising. The first Moana movie holds the title for the most-streamed film, further exemplifying Disney's reach.

Looking ahead, the upcoming release of Mufasa: The Lion King is predicted to be another substantial hit, along with an exciting film schedule for 2025 and beyond.

When Disney's various components align effectively, they create a formidable synergy. Having enjoyed a dominant position for many years, Disney is steadily regaining its footing. With a robust content library, leading global parks, and a creative engine that consistently produces successful films, Disney is well-prepared for growth in 2025.

However, this growth comes with inherent risks. Investors with a tolerance for risk and a long-term outlook may find it worthwhile to consider taking a position in Disney stock.

Disney, Stocks, Shareholders