Why Disney stock is lighting up Wall Street

Investors generally tend to think, at least subconsciously, that large, well-established companies — household names, to be more precise, don’t go through rough periods. There’s simply something surreal about the thought of, say, Coca-Cola (NYSE: KO) or Walmart (NYSE: WMT) struggling.

But it does happen — case in point, entertainment bastion and treasured purveyor of childhood memories Disney (NYSE: DIS). Although it is hard to imagine, the House of Mouse has run into quite a few issues after hitting its all time high (ATH) stock price of almost $200 in the first quarter of 2021 — subsequently collapsing to a 10-year low in September of 2023.

Covid-19 saw theme parks and cruise lines closed — and while Disney+ saw impressive growth initially, the momentum tapered off quite steeply. Leadership has also been an issue at Disney — with longtime CEO Bob Iger having to return to his post in 2022. Iger will once again resign in 2026.

Thus far, 2024 has been a mixed bag for the company — after reaching a $122 peak in April, the stock went into a decline that had lasted until early September. 

Now the time seems to have turned for the media giant — on November 14, shares opened at $111.35, up 8.2% from the last closing price of $102.91.

DIS stock surges on earnings beat

This latest surge, which has brought year-to-date (YTD) returns up to 22.76%, was caused by an unexpectedly strong showing from Disney’s Q4 and full-year 2024 earnings report released on November 14.

Earnings per share (EPS) came in at $1.14, surpassing consensus estimates of $1.11. This represents growth of 39% year-over-year (YoY). The company’s entertainment segment saw the largest improvement, with an operating income of $1.1 billion, up from just $0.3 billion in the same quarter last year — from 2021 to 2023, this division lost approximately $8.2 billion.

Disney also managed to put out two of the highest-grossing movies of 2024 thus far — Inside Out 2 and Deadpool & Wolverine, with box offices of $1.69 billion and $1.33 billion respectively.

On the streaming side of things, Disney+, Hulu, and ESPN managed to secure a $253 million profit in the quarter — in the corresponding period in 2023, the division posted a $420 million loss.

Disney is confident in its future — and so are investors

The media giant has a reputation for rarely issuing forward-looking guidance — but this earnings call was an exception. Disney expects to see high-single-digit EPS growth compared to 2024 in the coming year, and double-digit growth in 2026 and 2027.

At present, DIS stock could be an attractive opportunity for buy-and-hold investors — current prices would have to surge by approximately 80% to climb back to the all-time high, and the forward price-to-earnings ratio (P/E) of DIS shares sits at 19.94 — indicating that it could potentially be undervalued.

Wall Street equity researchers seem to have been right when they increased their price targets at the tail end of October — although Iger’s second exit is still a tumultuous topic as a successor has not been named, if Disney stock continues on this track, there’s little doubt that the stock has quite a lot of upside potential.

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