Disney’s Outlook Has Changed
For the past five years, I’ve nervously read every financial news update about Disney.
Wall Street investors share a common trait. They skew toward the side of the political aisle that Disney isn’t on.
Walt Disney Company
Fair or not, this one non-defining philosophy has caused many to view The Walt Disney Company skeptically.
As proof, I’ll point to the activist investor battle(s) with Nelson Peltz.
HEIDI GUTMAN/CNBC/NBCU PHOTO BANK/NBCUNIVERSAL/GETTY IMAGES; SLAVEN VLASIC/GETTY IMAGES
Yes, the billionaire suffered his worst defeat ever, but he also gained 30 percent of the vote.
That happened despite the fact that he was dangerously unqualified to sit on the Board of Directors for a digital company.
Photographer: Tasneem Alsultan/Bloomberg via Getty Images
That 30 percent vote signified Wall Street’s quiet judgment of our favorite company.
Well, that prejudice is fading right now. Disney’s outlook has changed, and people are starting to notice.
The Perils of Consensus Opinion
Photo: measureupgroup.com
On Monday, June 30th, the end of the first half of 2025, Disney stock closed at $124.01, an important milestone.
What’s the big deal with this total? Disney just closed at its highest total since April 18th, 2022.
Photo: Bank rate
Seemingly overnight, many investors noticed that $DIS has reached a three-year high, and they all raced to determine why.
The explanation contains nuance, but it’s mostly about Disney’s streaming services. But we’ll get to that.
Photo:IMGBIN
First, let’s admire a rare turn of events. Here are the various headlines from Monday on investor sites:
“Disney Stock (NYSE:DIS) Is a Buy With 49% Upside as Streaming and Parks Dominate”
“Analyst reboots Disney stock price target on cruise segment”
Photo: Computer Hope
“Disney snags bullish rating from Jefferies on Cruise unit upside, favorable content and sports slate”
“Disney: Streaming Scale And Parks Leverage Drive Strong Buy Rating”
“Disney’s Rally Still Has Legs – Robust Consumer Appetite For Entertainment/Travel”
“Disney: Earnings Guidance Is Encouraging, A Buy From Here”
“Disney’s DTC Could Be Worth $200 Billion, And That’s Just One Piece”
We’re going to talk about that last one for obvious reasons, and Justin Hermes posted this one the other day.
Photo:Rappler
I’m not exaggerating when I say that at times recently, Disney has gone six straight months without that many positive financial headlines.
Suddenly, the company received all of them within 24 hours, which tells the whole story here.
Photo Credit: AP Photo/Richard Drew, File
Disney is doing better, and people are noticing. The company’s entire outlook has changed.
Yes, $200 Billion
I can be a crusty cynic about Wall Street, as I witness more individual thinking from a group of lemmings.
When one influential person on Wall Street says something, conventional wisdom takes hold.
Photo:NYpost.com
Soon, that’s all anybody is saying, no matter how insipid it is. And God help us all if the speaker is Jim Cramer.
For this reason, I tend to pay more attention to linear thinkers who stake out their own opinions.
Photo: Disney
In early 2024, I started tracking improvements in the brick-and-mortar of Disney’s operation.
So, I sought out investment analysts smart enough to notice the same trends.
Alas, the person I’m about to discuss isn’t one of them, and I’m unfamiliar with their track record.
Thus, you should take the next few comments with a grain of salt, but…they’re interesting.
Photo: Wikimedia
A Seeking Alpha contributor named Kenio Fontes published this analysis of Disney’s Direct-to-Consumer (DtC) division.
The article is paywalled, but the gist is that he views $DIS as possessing 49 percent upside over the next five years.
Photo: vecteezy.com
Such growth would place Disney in the same range as its brief 2021 spike when it maxed out at $193.93 on February 23rd, 2021.
We’ve been downhill on the roller coaster since then, which makes Disney’s recent ascension all the more noteworthy.
Deadline
Fontes points out that Disney’s situation isn’t perfect, referencing the sizable long-term debt I’ve discussed.
Still, the analyst points to Netflix as an example of the value of a powerful streaming service.
Photo: Netflix
Currently, Disney isn’t trading at half of Netflix in some preferred Wall Street metrics.
Now, in the past, you could make the argument that other Disney divisions are dragging on the bottom line.
Photo: Getty Images/Ringer illustration
That’s no longer the case, though, as indicated by some of those other headlines. Disney’s theme parks and cruises are overperforming currently.
The Rising Tide
Forbes
When I saw this analyst’s valuation of Disney’s DtC division, I had to laugh.
I could just picture the faces of various Comcast executives when reading that statement.
Families Streaming Disney+
They must have been apoplectic because they just spent the body of 18 months arguing something similar.
Comcast felt strongly that Hulu was a “kingmaker” asset worth more than $40 billion.
Comcast
Thankfully for Disney, Comcast couldn’t find an arbitrator that agreed with the assessment.
They should have hired this individual, as the analyst argues effectively that Disney’s poised for growth.
Photo: Yahoo Finance
Here’s the key takeaway about the potential boom period for DtC:
“(The) operating margin, which is 5.5%, could reach 15%, 20%, or even 25% at this scale.
Again, let’s assume 15% to be conservative (Netflix’s net margin was over 27% in Q1).
That would give us an operating income of $6.6 billion, and would likely be the main driver of the company’s results if we consider a stabilization of the remaining segments.”
Photo: Getty
That’s the future Disney CEO Bob Iger envisioned with Disney+ in the 2010s.
In this scenario, its earnings entirely replace the eroding revenue of Linear Networks.
ANAHEIM, CALIFORNIA – AUGUST 09: Bob Iger, CEO, The Walt Disney Company appears at the Disney Entertainment Showcase at D23: The Ultimate Disney Fan Event in Anaheim, California on August 09, 2024. (Photo by Jesse Grant/Getty Images for Disney)
The analyst then shows his multiples of growth calculations for the accurate valuation of Disney’s DtC division.
While I think they’re a bit ambitious, the concluding statement here is fascinating:
Photo: skillastics.com
“(We) could find that this subscription business alone could be worth a little more than $200 billion that Disney is worth today in 2030.
And as a “bonus” we would have the rest of the company.” That’s right, folks!
Photo: Disney
As I type this, Disney’s entire company has a market cap of just under $223 billion.
This investment analysis supports the notion that DtC alone could grow to be as valuable as the entirety of Disney right now.
Disney’s Outlook Has Changed
Photo: Disney
I can assure you that nobody was making such lofty claims 18 months ago. DtC hadn’t even turned a profit yet.
That’s how much Disney’s outlook has changed for the better since early 2024.
Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Not that long ago, Peltz was accusing Disney of throwing everything against the wall to see what would stick.
He was referencing deals for an Epic Games/Fortnite stake and the theatrical release of Moana 2.
DCL
Now, Disney is so rock solid that I’m not even detailing other, equally positive analysis today.
I’ll save it for later, but you can go ahead and peek at this Disney Cruise Line article or this one about the parks (and DtC).
DCL
For the first time in ages, the news is decidedly positive throughout the entire Disney empire.
Keep reading MickeyBlog in the coming days as we explain more of the terrific details.
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Feature Photo: DIsney
