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Earning Crusher Puts Bulls Back in Charge of Disney

It’s a company that your grandparents might have invested in for safety and low volatility. World-famous Walt Disney (NYSE:DIS) is a generational holding – or at least it ought to be, but many traders dumped their DIS stock s…

It’s a company that your grandparents might have invested in for safety and low volatility. World-famous Walt Disney (NYSE:DIS) is a generational holding – or at least it ought to be, but many traders dumped their DIS stock shares last year.

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As we’ll recount, the Disney share price zoomed in early 2021 but tanked in the fourth quarter. As the omicron Covid-19 variant strain spread rapidly, some folks undoubtedly wondered whether Disney’s theme parks would see much foot traffic.

At the same time, the skeptics may have doubted Disney’s ability to capitalize on the streaming revolution of the 2020s. It’s a valid question: can the Disney+ streaming service stand up to the competition?


It’s fair to infer, then, that there was a lot riding on Disney’s just-released earnings data. Without giving away too many spoilers, let’s just say that the House of Mouse is still solid and profitable.


A Closer Look at DIS Stock

When DIS stock jumped from $180 to nearly $200 in early 2021, it certainly seemed as if the bulls were on the front foot. The optimistic sentiment wasn’t destined to last throughout the year, however.

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Even before the news of omicron broke, the Disney share price was heading toward $150. The stock tumbled below $150, and even briefly below $140 in early 2022, as omicron-related headlines weighed on investor sentiment.

On Feb. 10, however, a modern miracle happened. DIS stock jumped back up above $150, giving hope that the selling pressure would finally cease.


Could 2022 provide the investors with a Disney-like, fairy-tale ending? Only time will tell, but it’s hard to resist this unfolding story as Disney reminds us, once again, of its imposing stature among global entertainment companies.

Packing the Parks

So, what could possibly have galvanized the buyers to push DIS stock back above the crucial $150 mark?


It doesn’t take a rocket scientist to figure out that Disney’s fiscal first-quarter financial report fueled the fire for Disney’s investors.

Let’s start off with the basics. The analyst consensus called for 74 cents in adjusted earnings per share for the quarter. Yet, Disney blew that prediction away with $1.06 in adjusted per-share earnings, which represented a 231% year-over-year improvement.


On top of that, Disney’s $21.8 billion in quarterly revenue demonstrated a 34% year-over-year increase, while also beating the Wall Street estimate of $20.3 billion.

Perhaps the most significant highlight of the fiscal report, though, was Disney’s quarterly performance in its Parks, Experiences and Products segment.


Fortunately, Disney is still doing brisk business in its theme parks and other in-person experiences. During its the fiscal first quarter, Disney generated $7.2 billion in revenue in its Parks, Experiences and Products segment

The analysts were only expecting Disney to generate $6.4 billion in revenues in that segment. They also called for Disney to show a $1.4 billion profit in Parks, Experiences and Products, but the company beat that by reporting nearly $2.5 billion.


A Streaming Standout

Still, even with those impressive stats, there will be skeptics. The doubters might think of Disney as a “legacy” media and entertainment business. That’s a polite way of calling Disney a dinosaur, or too old-fashioned to keep up with other businesses in the streaming sector.


That’s an unfair assessment, and Disney’s fresh earnings report proved that the company is actually a streaming standout.

For one thing, Disney reported a whopping 129.8 million Disney+ subscribers during the first fiscal quarter. That figure is 11.8 million greater than the one from the prior quarter.


Besides, when we include ESPN+ and Hulu and other Disney streaming services in the mix, the number expands to 196.4 million total streaming subscribers. On average, the analysts (as measured by FactSet) were only anticipating 124.7 million Disney+ subscribers and 191.1 million total streaming subscribers.

Hopefully, the positive momentum in this segment will continue. Regarding this, Disney’s management reaffirmed their target of 230 million to 260 million Disney+ subscribers, to be achieved by the end of the company’s fiscal 2024.


The Bottom Line

Despite Disney’s progress in multiple business segments, DIS stock has a lot of catching up to do.

On the other hand, the months-long drawdown in the share price presents a terrific buying opportunity. The idea is to let volatility be your friend, not your enemy.


There’s also a larger narrative here. As robust business activity returns to Disney’s theme parks, it’s a positive sign for the U.S. economy in general.

Hence, there’s no need to worry about the House of Mouse. In early 2022, Disney is staging a comeback of epic proportions. This, really, should relieve and inspire Disney’s investors and theme-park visitors alike.


On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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