Source: PaxForex Premium Analytics Portal, Fundamental Insight
Walt Disney has experienced a rollercoaster year in 2024. The media giant's shares surged early on, peaking in March with a 37% increase, making it the top performer among the Dow Jones Industrial Average components. However, Disney no longer holds that title.
Despite lagging behind the market for three consecutive years, it initially appeared that Disney was finally rewarding its shareholders. Yet, the stock's performance has waned, and it now trades only 6% higher, trailing behind all three major market averages.
This doesn't have to be the case for the rest of the year. Let's explore why Disney shares have the potential to recover in the second half of 2024.
Disney is a complex company with many moving parts, not all of which are currently favorable. Analysts predict a modest revenue growth of 3% for the fiscal year ending in September, with an acceleration to 5% in fiscal 2025. However, the outlook for profitability is more optimistic, with Wall Street expecting a 26% increase this year and another year of double-digit growth to follow.
Some of the significant challenges Disney faced during the pandemic are now receding. Notably, its streaming service, Disney+, recently reported an operating profit for the first time in years. After enduring substantial operating losses in its direct-to-consumer streaming division, Disney anticipates returning to profitability in this segment by the fiscal fourth quarter and continuing this trend into fiscal 2025.
Another hurdle for Disney has been its recent struggles at the box office. However, Inside Out 2 recently became the first film from any studio to surpass $1 billion in global ticket sales since Barbie's phenomenal success last summer. With a promising lineup of releases in the latter half of the year, beginning with Marvel's Deadpool & Wolverine this weekend, Disney's narrative of box office disappointment may soon find a Hollywood ending.
The proxy battle concluded at April's shareholder meeting was quite eventful. In February's fiscal first-quarter update, Disney had to sprinkle a lot of pixie dust to fend off activist momentum. Was it really necessary to announce a 50% dividend hike that wouldn't be paid for another five months?
Disney had little left to excite the market in its May update, but investors can now look forward to the morning of August 7. This is when Disney will report its fiscal third-quarter results. Expectations are low, largely due to Disney's own guidance. In May, the company warned that its streaming business would face challenges in the June quarter before returning to profitability in the following period. It also highlighted difficult year-over-year comparisons for its theme parks due to holiday timings and significant events from the previous year. Additionally, Disney will have initial data on the rebranding and upgrade of its Lightning Lane Multi Pass premium queue service, which launches later this week.
August won't be about reflecting on the past but looking forward. Theme park enthusiasts can anticipate the D23 event Disney will host shortly after its financial update. During this event, Disney is expected to unveil new experiences for its popular parks. Furthermore, the release of the film Alien: Romulus, set to premiere a week later, aims to revive the iconic sci-fi horror franchise.
With Disney shares falling back below $100, the stock has underperformed in recent months, contrasting sharply with the general market rally. However, the elements are in place for Disney to reclaim its leadership position among entertainment stocks. It's time for Disney to start delivering again.
As long as the price is below 100.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 93.80
- Take Profit 1: 90.00
- Take Profit 2: 87.00
Alternative scenario:
If the level of 100.00 is broken-out , follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 100.00
- Take Profit 1: 104.00
- Take Profit 2: 107.00
