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Disney (DIS) Shares Fall on Plans to Raise Theme Parks Spending

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Disney (DIS - Free Report) is planning to expand investment in its Parks, Experiences and Products segment, which accounted for 37.3% of total revenues in third-quarter fiscal 2023. Over the next decade, Disney plans to double its capital expenditure to nearly $60 billion.

However, the company’s plan hurt shares, which declined 3.62% to close at $81.94 on Sep 19. Disney shares have declined 5.7% year to date, underperforming the Zacks Consumer Discretionary sector’s return of 7.2%.

Higher Spending to Aid Disney’s Theme Park Prospects

Disney plans to spend on expanding and enhancing domestic and international parks and cruise line capacity. The recovery in the Parks, Experiences and Products segment has been a key catalyst in driving top-line growth, with segment revenues increasing 12.6% year over year to $8.33 billion in the fiscal third quarter.

Upcoming attractions include the new Frozen-themed lands in Hong Kong Disneyland, Walt Disney Studios Park in Paris and Tokyo Disney Resort, as well as a Zootopia-themed land at Shanghai Disney Resort.

Disney recently provided updates about its theme park business at the Destination D23 event. New introduction like a Pirates of the Caribbean-themed lounge is coming to Adventureland at Magic Kingdom Park in Florida, and a brand-new world-jumping vehicle is coming to the Avengers Campus.

Disney also announced that its imagineers are reimagining the Test Track of EPCOT and Dinoland U.S.A. at Disney’s Animal Kingdom.

Disney now plans to explore and invest in themes like Wakanda and The World of Coco. Disney Parks has more than 1000 acres of land for possible future development of theme parks. Moreover, the company’s cruise line is extending its reach to Australia and New Zealand for the first time later this year.

Over the next couple of years, Disney will roughly double the worldwide capacity of its cruise line, adding two ships in fiscal 2025 and another in 2026. It will introduce Singapore as a new homeport beginning 2025, thereby expanding its reach in the Asia-Pacific region.

Disney Suffers From Stiff Competition

Disney shares have underperformed its closest peers like Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) and Comcast (CMCSA - Free Report) . Shares of Netflix, Amazon and Comcast returned 34.4%, 63.8% and 30.8%, respectively.

Stiff competition from Comcast in the theme park business is hurting Disney’s prospects. DIS has suffered from the underwhelming performance of its streaming business, Disney+ due to intensified competition from Netflix, Amazon Prime Video and Comcast’s Peacock. Moreover, the disappointing theatrical release of Ant-Man and the Wasp: Quantumania and Elemental also hurt growth.

Nevertheless, Disney’s focus on sports streaming, particularly Live Sports on ESPN+, is expected to attract more subscribers. The renewal of the MLB sports rights deal through 2028 and the agreement with Spanish club football’s first division, La Liga, further strengthened the portfolio of the company’s sports content. These factors will be a tailwind in DIS’ international success regardless of facing stiff competition from Netflix and Amazon.

For the current quarter, this Zacks Rank #3 (Hold) company estimates revenues between $21.15 billion and $21.53 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for fourth-quarter fiscal 2023 is pegged at $21.34 billion, indicating year-over-year growth of 5.89%. The consensus estimates for earnings declined by a couple of cents over the past 30 days to 76 cents per share.

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