Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bob Iger's clock is ticking. The former CEO of the Walt Disney Company, who decided that in retirement he would happily write books and perhaps realize his political ambitions, has taken over the media giant again. The company has a lot to fix, and it's easy to wonder if he will be able to get everything done in the two years he set before retiring again.
Let's get right to the point: likely, Iger will still be CEO in three years. you can even make an even bolder prediction, suggesting that Disney stock will have more than doubled in three years. The stock is down about half of what it was at its peak two years ago, so let's see why the House of Mickey could hit new highs by early 2026 (if not sooner).
Let's assume what many market observers think is obvious right now. The global economy will get worse before it gets better, and that will be a blow to Disney's gut as a consumer-oriented titan. Advertisers will cut their marketing budgets for the company's television and streaming business. The iconic theme park segment, which set new records in the fiscal year 2022, will be threatened. Box office receipts will continue the systemic decline that has persisted for two decades.
Fortunately, the horizon is brighter than the immediate outlook. Let's start with Disney's media and entertainment distribution segment. In the fiscal year 2022, the company's revenues grew 8% as 20% growth in its premium streaming business was enough to lift flat results on traditional linear networks.
Disney+ - along with Hulu and ESPN+ - now accounts for nearly a quarter of the company's total revenue. The sticking point here is that the direct-to-consumer streaming business had an operating deficit of more than $4 billion last fiscal year. Problems at Disney+ are the main reason Iger had to return to his post. When the platform was launched three years ago, the goal was for Disney+ to be profitable by the end of fiscal 2024. Given the growing losses, this seemed unlikely. As Iger sets his main goal, you have to like the odds of him managing to properly balance streaming. It may not happen in two years, but in three years it might. The recent price increases and the addition of ad-supported levels should help Disney+ in its quest to add to the media giant's bottom line, not take away, by early 2026.
Advertising will naturally return to the marketplace when consumers start spending again, and Disney's unrivaled catalog of content and franchises will continue to make it a desirable market for advertisers. Even though Avatar: The Way of the Water became the first film since 2019 to exceed $2 billion in ticket sales worldwide, theatrical distribution will continue to be a challenge for Disney and its peers. The good news is that the company already has strong and established streaming platforms that will help make up for any weakness in local multiplexes.
As for Disney's theme park business, that segment saved it last year as "revenge travels" became popular. People were paying a premium to return to the leading theme park operator after abandoning plans for vacations in 2020 and at least globally in 2021. Turnstile attendance in this segment will slow down this year, or even next year unless there is a soft landing under growing economic pressure, but Disney's shuttered rides always bounce back.
An interesting year for theme parks will be 2025 when the company's biggest competitor in Florida will open Epic Universe at Universal Orlando. Disney will need to retaliate if it doesn't want to lose market share at its biggest resort. Iger hasn't talked much about the future of Disney's theme park business, but if he really wants to consolidate his influence - and this time stay out for good - it will have to be more than just a Disney+ conversion. It's too late for Disney to build a new park in Florida to compete with Epic Universe when it opens, but by then plans will probably be in place to keep visitors close and shareholders even closer.
Disney continues to be the best player among media stocks. Sliding revenues are already above their peak before the pandemic in fiscal 2019. Analysts believe adjusted earnings by fiscal 2026 will surpass the historical high of $7.08 per share reached in fiscal 2018. If Iger succeeds this time around, a return to the $200 mark over three years seems more than reasonable for the company's stock.
As long as the price is above 100.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 109.1
- Take Profit 1: 113.00
- Take Profit 2: 117.00
Alternative scenario:
If the level of 100.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 100.00
- Take Profit 1: 95.00
- Take Profit 2: 90.00
