Disney stock (NASDAQ:DIS) has performed poorly as the economy adapts to inflation and the present stage of the epidemic. Shares have fallen 33% in 2022 due to the bear market, which has been accelerated by aggressive US Federal Reserve interest rate rises to calm inflation.
Following a small bounce following the most recent earnings report in August, Disney shares have dropped back to where they were in the summer of 2020.
The company is far from flawless, but the sale seems excessive. Disney stock seems to be a great investment right now.
There Will Be Some Magic in the Material Releases
Let’s begin with the streaming industry. At the beginning of July 2022, Disney+, Hulu, and ESPN+ together had more than 221 million paid members (152 million of which were Disney+ and the Disney+ Hotstar foreign offering). Disney had great success raising Hulu subscriber numbers by offering advertising-supported tiers, and the same concept is going to be reproduced for Disney+.
Disney+, with no commercials, will go from $7.99 to $10.99 per month in December. To effectively keep the entry-level tier price the same, a new ad-supported tier will emerge at $7.99 per month. Other changes have been made to bundle packages with Hulu and ESPN+ to improve customer alternatives, but CEO Bob Chapek has said that the inclusion of commercials will not make streaming viable on its own. Rather, the objective is to continue increasing overall members, with 230 million to 260 million Disney+ and Disney+ Hotstar subscribers expected in fiscal 2024.
As a reminder, Disney’s “direct-to-consumer” sector (which includes the streaming services) lost $2.54 billion in the first nine months of fiscal 2022. Disney has said that this year will most likely be the low point for those losses as it continues to grow its subscriber base.
Now that the filmmaking studios are back in business, a regular stream of material is being provided to keep audiences interested. The same is true with theatrical releases. The second Black Panther film will be released in November, ending a protracted theatrical drought that began with Thor: Love and Thunder in July. The Avatar sequel, which has been in the works for a decade and a half, will be released in December.
Blockbusters have remained popular with moviegoers. In the other superhero world, DC’s Black Adam (part of Warner Bros Discovery) earned $67 million in its first weekend in the United States, despite receiving mixed reviews. With its two forthcoming films, Disney might see comparable major pulls to local cinemas, providing a significant financial boost to its media and entertainment division (operating income of $4.13 billion so far in 2022, down 35% year on year).
Meanwhile, Disney Parks…
While the streaming and film distribution industries work to fulfill their full potential, several Disney theme parks are back on track.
Disney theme parks are once again lucrative and prosperous. The segment’s operational profitability was $6.39 billion in the first three quarters of 2022, compared to a loss of $169 million in the same time in 2021. This increase in consumer spending is likely to fade, particularly with the Fed attempting to cool economic growth.
Is Disney Stock a Buy?
Overall, I believe the current sell-off reflects tremendous pessimism about the economy, even though consumers have been relatively robust. DIS stock (NASDAQ:DIS) is at the top of my list of travel and entertainment stocks.
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