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With its familiar cable networks, large streaming services, and theme parks around the globe, Walt Disney (NYSE: DIS) is a leader in the media and entertainment sector. The business has been around for over a century, proving that people of all ages worldwide will always love great storytelling.
This well-known consumer discretionary stock has had a difficult run, as it's down 58% from its all-time high established in March 2021 (as of April 11). But there is certainly an opportunity for investors, in my opinion, especially for those who can think independently and have the patience to wait for things to play out.
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Here are three reasons to buy Disney shares like there's no tomorrow.
Streaming improvements
Disney fully entered the streaming wars in November 2019 when it launched Disney+. This move was probably a bit later than observers would have expected. Another surprising development was just how much money the service started to burn. During the fourth quarter of fiscal 2022, the company's direct-to-consumer (DTC) segment, which includes Disney+, Hulu, and ESPN+, posted a peak operating loss of $1.5 billion.
The situation has improved drastically. Disney DTC registered positive operating income in the last three fiscal quarters. The leadership team expects the segment (excluding ESPN+) to report $1 billion in operating income in fiscal 2025.
Significant cost controls, particularly around content spending, have helped to improve profitability. However, investors must pay attention in the hopes that this doesn't get in the way of growth. The DTC division reported a 9% year-over-year revenue increase in the first quarter, with subscribers totaling over 178 million. So far, things look good.
Disney's best segment
Disney is a massive, multifaceted organization. The decline of linear TV, coupled with the rising popularity of streaming, get all the attention. But Disney's Experiences segment, where its theme parks, cruise lines, and consumer products are all housed, is arguably the company's most important financial driver.
In fiscal 2024 (ended Sept. 28), Experiences represented 37% of Disney's overall revenue, while accounting for 59% of its operating income. It boasts a stellar 27% operating margin, highlighting how lucrative an endeavor it really is.
According to management, the business has seven of the top 10 most visited parks in the world, and there are a whopping 700 million Disney fans in the world who have not visited yet.