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Disney Earnings Preview: Buy DIS Stock on the Dip for 2020 Streaming Growth?
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Disney (DIS - Free Report) stock has soared two sperate times over the last year after investors and Wall Street bought up its streaming TV push. Shares of Disney have fallen to start 2020 and are down 10% since late November. The question now is: Should investors consider buying Disney stock with it set to report its quarterly earnings on February 4?
Disney’s Streaming Push
Disney entered the streaming TV market on November 12, with the launch of Disney+. The historic entertainment giant’s platform costs $6.99 a month and grants users access to old and new content from its namesake brand, Pixar, Marvel, Star Wars, and National Geographic. Consumers can also pay $12.99/month to bundle Disney+, along with ESPN+, and ad-supported Hulu. This is significant since that is the same price Netflix (NFLX - Free Report) chargers for its widely-popular standard plan.
Disney’s price points are compelling in a crowded market, especially given its substantial content library. The company will roll out new movies and shows from Disney, Pixar, Star Wars, and Marvel all on Disney+. Plus, the platform will be the exclusive streaming home for all of its movies and TV shows going forward. And remember not too ago Netflix was home to many of Disney’s box office hits.
Of course, the streaming TV market is already crowded. And NBCUniversal’s (CMCSA - Free Report) Peacock and the beefed-up HBO MAX (T - Free Report) are set to enter the fray soon to challenge for users alongside Amazon (AMZN - Free Report) , Apple TV+ (AAPL - Free Report) , and others.
Netflix is still king, having closed Q4 with 167 million paid global users. However, Netflix’s growing debt and slowing U.S. user growth continue to worry Wall Street. And this is where Disney+ should be able to continue to attract users and investors.
Broader Pitch
Disney+ offers one of the more complete and compelling content libraries in streaming, bolstered by its Hulu ownership and its $71 billion deal to acquire key Fox entertainment assets.
Disney’s goal is to create a kind of virtuous cycle where its blockbuster hits make billions and then live only on its streaming TV service. For example, Disney released seven different billion-dollar movies in 2019 alone, including Avengers: Endgame—which is now the highest-grossing movie ever. For reference, only 45 movies have ever grossed more than $1 billion in history.
Alongside the box office and its new streaming unit, Disney makes money from cable and broadcast TV and its “Parks, Experiences, and Products” division. Disney’s diversification might help attract investors, as Netflix’s days of massive growth are likely over after it was one of the top-performing stocks of the past decade.
With that said, Barclays analysts recently noted that investors have already valued Disney’s streaming business at more than $100 billion. Looking ahead, Disney has targeted between 60 million to 90 million global subscribers by the end of its fiscal 2024.
Other Fundamentals
As we mentioned at the top, Disney shares have fallen over the last two months. DIS stock closed regular trading Wednesday at $136.06 a share. This put DIS stock about 10% below its 52-week highs, which could give it room to run heading into its upcoming earnings report.
Disney’s valuation has grown stretched on the back of its 2019 climb, but this is hardly out of the ordinary with the S&P 500, Apple, Microsoft (MSFT - Free Report) , and other giants all stretched at the moment. And Disney's earnings have fallen as it spends on its future.
Unlike Netflix, Disney also pays a dividend, which yields 1.27% right now. Plus, the firm is part of an industry that rests in the top 5% of our more than 250 Zacks industries, which is often helpful.
Bottom Line
Disney reported its Q4 fiscal 2019 results in early November. Its fiscal 2019 revenue surged 17%, driven by its Fox deal and its Hulu ownership, which were included for the first time in Q3.
Our Zacks estimates call for the firm’s Q1 FY20 sales to soar 37.7%. Peeking further ahead, Disney’s fiscal 2020 revenue is projected to jump by a similar 17.7% to $81.87 billion, with 2021 expected to come in 7.4% higher.
Disney’s streaming transformation has not been cheap. But Wall Street didn’t think it would be. Disney’s adjusted Q1 earnings are projected to fall over 22% to $1.43 per share, with its full-year earnings set to dip 6.4%—after they slipped 19% last year.
But Disney’s earnings growth is poised to return in 2021, with it expected to surge roughly 18% above our current-year estimate. On top of that, Disney’s longer-term positive earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy) at the moment.
As a reminder, Disney reports on Tuesday, February 4. And it is likely prudent to wait to see how Wall Street reacts and watch for any early Disney+ results.
In the long run though, Disney appears to be worth considering as an investment in the streaming TV age. DIS has a diverse portfolio and its streaming business includes live sports and name-brand content, which could help it stand out in a crowded market for decades.
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Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
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Disney Earnings Preview: Buy DIS Stock on the Dip for 2020 Streaming Growth?
Disney (DIS - Free Report) stock has soared two sperate times over the last year after investors and Wall Street bought up its streaming TV push. Shares of Disney have fallen to start 2020 and are down 10% since late November. The question now is: Should investors consider buying Disney stock with it set to report its quarterly earnings on February 4?
Disney’s Streaming Push
Disney entered the streaming TV market on November 12, with the launch of Disney+. The historic entertainment giant’s platform costs $6.99 a month and grants users access to old and new content from its namesake brand, Pixar, Marvel, Star Wars, and National Geographic. Consumers can also pay $12.99/month to bundle Disney+, along with ESPN+, and ad-supported Hulu. This is significant since that is the same price Netflix (NFLX - Free Report) chargers for its widely-popular standard plan.
Disney’s price points are compelling in a crowded market, especially given its substantial content library. The company will roll out new movies and shows from Disney, Pixar, Star Wars, and Marvel all on Disney+. Plus, the platform will be the exclusive streaming home for all of its movies and TV shows going forward. And remember not too ago Netflix was home to many of Disney’s box office hits.
Of course, the streaming TV market is already crowded. And NBCUniversal’s (CMCSA - Free Report) Peacock and the beefed-up HBO MAX (T - Free Report) are set to enter the fray soon to challenge for users alongside Amazon (AMZN - Free Report) , Apple TV+ (AAPL - Free Report) , and others.
Netflix is still king, having closed Q4 with 167 million paid global users. However, Netflix’s growing debt and slowing U.S. user growth continue to worry Wall Street. And this is where Disney+ should be able to continue to attract users and investors.
Broader Pitch
Disney+ offers one of the more complete and compelling content libraries in streaming, bolstered by its Hulu ownership and its $71 billion deal to acquire key Fox entertainment assets.
Disney’s goal is to create a kind of virtuous cycle where its blockbuster hits make billions and then live only on its streaming TV service. For example, Disney released seven different billion-dollar movies in 2019 alone, including Avengers: Endgame—which is now the highest-grossing movie ever. For reference, only 45 movies have ever grossed more than $1 billion in history.
Alongside the box office and its new streaming unit, Disney makes money from cable and broadcast TV and its “Parks, Experiences, and Products” division. Disney’s diversification might help attract investors, as Netflix’s days of massive growth are likely over after it was one of the top-performing stocks of the past decade.
With that said, Barclays analysts recently noted that investors have already valued Disney’s streaming business at more than $100 billion. Looking ahead, Disney has targeted between 60 million to 90 million global subscribers by the end of its fiscal 2024.
Other Fundamentals
As we mentioned at the top, Disney shares have fallen over the last two months. DIS stock closed regular trading Wednesday at $136.06 a share. This put DIS stock about 10% below its 52-week highs, which could give it room to run heading into its upcoming earnings report.
Disney’s valuation has grown stretched on the back of its 2019 climb, but this is hardly out of the ordinary with the S&P 500, Apple, Microsoft (MSFT - Free Report) , and other giants all stretched at the moment. And Disney's earnings have fallen as it spends on its future.
Unlike Netflix, Disney also pays a dividend, which yields 1.27% right now. Plus, the firm is part of an industry that rests in the top 5% of our more than 250 Zacks industries, which is often helpful.
Bottom Line
Disney reported its Q4 fiscal 2019 results in early November. Its fiscal 2019 revenue surged 17%, driven by its Fox deal and its Hulu ownership, which were included for the first time in Q3.
Our Zacks estimates call for the firm’s Q1 FY20 sales to soar 37.7%. Peeking further ahead, Disney’s fiscal 2020 revenue is projected to jump by a similar 17.7% to $81.87 billion, with 2021 expected to come in 7.4% higher.
Disney’s streaming transformation has not been cheap. But Wall Street didn’t think it would be. Disney’s adjusted Q1 earnings are projected to fall over 22% to $1.43 per share, with its full-year earnings set to dip 6.4%—after they slipped 19% last year.
But Disney’s earnings growth is poised to return in 2021, with it expected to surge roughly 18% above our current-year estimate. On top of that, Disney’s longer-term positive earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy) at the moment.
As a reminder, Disney reports on Tuesday, February 4. And it is likely prudent to wait to see how Wall Street reacts and watch for any early Disney+ results.
In the long run though, Disney appears to be worth considering as an investment in the streaming TV age. DIS has a diverse portfolio and its streaming business includes live sports and name-brand content, which could help it stand out in a crowded market for decades.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
See their latest picks free >>