As Walt Disney Company (NYSE:DIS) stock struggles with a year-to-date gain of just over 6%, investors are questioning whether 2024 could mark a turnaround for the entertainment giant. Disney’s underperformance, enduring for over a decade with an 18% loss in the last five years, prompts an exploration of its recovery potential.

Analyzing Disney’s Underperformance

Over the last decade, Disney shares have seen only a 31% increase, considerably less than the returns delivered by the SPDR S&P 500 ETF (SPY). This underwhelming performance contrasts sharply with Disney’s iconic global brand status and its diversified offerings for all age groups.

Factors Contributing to Disney’s Decline

Earnings Stagnation: Disney’s operating profit has shown anemic growth over the last decade, peaking in fiscal year 2018. While theme park profitability rose, the contribution from the Media Networks segment declined drastically, impacted by the decline of cable TV in the streaming era.

Streaming Challenges: Despite the success of Disney+ with 100 million subscribers in 16 months, the streaming segment is still incurring losses. Disney’s pivot to streaming hasn’t fully offset the decline in cable TV profits.

Underperforming Releases: Recent film releases like “Wish” and “The Marvels” have underperformed at the box office. Even with CEO Bob Iger’s return, the stock has not seen significant improvement.

Bob Iger’s Strategy for Recovery

Bob Iger, who returned as CEO a year ago, aims to rejuvenate Disney’s performance. Acknowledging recent film challenges, he emphasized prioritizing quality over quantity. Iger anticipates the streaming business reaching breakeven this fiscal year and has announced substantial cost-cutting measures.

2024 Recovery Outlook

Quality Focus: Iger’s commitment to prioritizing quality, coupled with cost-cutting measures, is expected to enhance Disney’s earnings and appease investors.

Streaming Growth: The company aims to achieve profitability in its streaming business, with cost-cutting initiatives contributing to improved earnings.

Direct-to-Consumer Platform: Launching a direct-to-consumer platform for ESPN by 2025 and introducing the sports-gambling platform ESPN Bet could serve as additional growth drivers.

Park Investments: Disney plans to invest $60 billion in its parks over the next decade, addressing concerns about service and wait times.

The Path to Disney’s “Magic” Return

The stock, currently trading at a reasonable next 12 months (NTM) price-to-earnings multiple of just under 21x, could see a positive shift in market perception. Successful execution of cost-cutting measures, streaming profitability, and potential box office hits could contribute to Disney’s recovery in 2024.

In conclusion, with strategic initiatives underway and a renewed focus on quality, Disney’s “magic” might return sooner rather than later, positioning the company for a brighter future.

Featured Image: Megapixl

Please See Disclaimer