Disney Stock Has a Lot to Prove This Week

There will be a lot to dissect this week for Walt Disney (DIS 0.48%). Tuesday afternoon’s quarterly report is going to be the immediate catalyst for a move higher or lower, but don’t sleep on the significance of Black Panther: Wakanda Forever hitting a multiplex near you and the debut of Zootopia+ on Disney+ later this week.

Fresh financials. Fresh content. There’s a lot for Disney to deal with this week, but it can use the exercise. The stock would have to more than double from here to get back to the all-time highs it hit early last year.

Image source: Disney.

There’s some good news, bad news, and then more good news heading into Disney’s fiscal fourth quarter. The first batch of good news is that analysts see revenue climbing 30% to $21.25 billion. The year-over-year comparisons will be kind. Disney’s theme parks are well ahead of where they were a year ago, not only in improving crowd levels but in ascending average revenue per capita.

Disney+ and the rest of the media giant’s streaming services are expanding. Its movie studio arm isn’t having the same kind of theatrical success it had before the pandemic, but it’s getting better. Its media networks segment could be feeling the pinch that we’re seeing in the weakening advertising market, but the sum of all of Disney’s parts could be more than 30% ahead of where it was last year.

An important metric here is that the $21.25 billion in revenue that Wall Street pros are modeling is 11% ahead of the record results it posted in the fiscal fourth quarter of 2019. In short, the stock has been cut in half, but its business is about to clock in with record top-line results for the final fiscal quarter. 

Now the bad news. Analysts were targeting a profit of $0.85 a share for the fiscal fourth quarter three months ago. The estimate was whittled down to $0.60 a month ago, and is now $0.56. This would be a healthy jump from the $0.33 a year ago, but still below where it was before the COVID-19 crisis. 

This brings us back to some good news. Disney has plenty of reasons to be optimistic about its near-term outlook. Its theme parks are continuing to grow, and the segment’s operating profit is probably growing even stronger. Disney+ won’t turn a profit for another two fiscal years, but price hikes kicking in next month should help speed up that road trip. The content pipeline is also encouraging.

The sequel to Marvel’s Black Panther opens on Thursday night. It’s not likely to top the $700 million that the original rang up in domestic ticket sales in 2018. Losing its star and a secular decline in theatrical attendance won’t help. But it will still move the needle for the industry. If it comes close to the $500 million in box office receipts that industry watchers are forecasting, it will be this year’s biggest winner outside of Top Gun: Maverick.

The new Disney+ animated series based on its cult fave Zootopia movie won’t be as important as the two other events, but content is king when it comes to media stocks. Zootopia+ could give families one reason fewer to cancel Disney+, and it gives the family entertainment giant another reason to push ahead with its proposed addition of a Zootopia-themed area to Disney World’s Animal Kingdom.  

The House of Mouse might be on sale, but it’s no fixer-upper. 

Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.