Disney stock slipped after Q3 results

Disney raised its streaming prices on Tuesday just before reporting Q3 results on Wednesday. The company is also celebrating its first Marvel Cinematic Universe box-office hit in years and has renewed its NBA partnership, launching a new sports streaming service this fall. Despite these developments, Disney's stock declined on Wednesday.

Monitoring Disney’s Valuation

DIS stock opened at $86.21 on Thursday. The company has a debt-to-equity ratio of 0.38, a current ratio of 0.75 and a quick ratio of 0.69. The company’s 50 day simple moving average is $96.90 and its 200-day simple moving average is $105.13. Walt Disney has a 12 month low of $78.73 and a 12 month high of $123.74. The firm has a market capitalization of $157.16 billion, a PE ratio of 93.71, a P/E/G ratio of 1.15 and a beta of 1.40.

Raising its full-year EPS guidance, Disney now expects earnings to grow 30% in fiscal 2024 compared to previous targets of 25% growth. This is slightly above the current Zacks Consensus of $4.86 per share or 29% growth.

Trading around $85, Disney’s stock trades at 18X forward earnings and at a noticeable discount to the S&P 500’s 22.4X and Netflix’s 33X. More intriguing, DIS trades well below its decade-long high of 134.4X forward earnings and at a 15% discount to the median of 21.3X.

Plans to raise subscription prices

On Tuesday, Disney (DIS) revealed plans to increase subscription prices for its streaming services. Beginning October 17, the basic Disney+ plan will rise from $7.99 to $9.99 per month, while the ad-free version will increase by $2 to $15.99 per month. Hulu with ads will see a $2 price hike to $9.99 per month, and the ad-free Hulu plan will increase from $17.99 to $18.99 per month.

ESPN+ will also experience a $1 increase, bringing its monthly fee to $11.99. The cost of the basic Disney+ and Hulu bundle will rise by $1 to $10.99 per month, though the ad-free bundle will remain at $19.99 per month.

For Hulu + Live TV, the ad-supported plan will increase to $82.99 per month from $76.99, while the ad-free version will go up to $95.99 per month from $89.99.

Earlier on July 25, Disney announced a new bundle with Warner Bros. Discovery, combining Disney+, Hulu, and Max. The basic bundle with ads is priced at $16.99 per month, while the ad-free version costs $29.99 per month. This bundle offers a 38% discount compared to buying the services individually.

With 154 million subscribers, the flagship Disney+ service looks like it's already one of the winners in the global streaming wars. And with the planned launch of a stand-alone ESPN streaming app in 2025, it's hard to envision a world in which Disney doesn't attract more subscribers.

Encouraging revenue

Revenue in the Experiences segment increased by just 2% year-over-year, reflecting a slowdown in both attendance and guest spending internationally, which now mirrors the domestic trend seen over the past year after a period of rapid post-pandemic growth. Additionally, operating income in this segment decreased by 3% due to a 150 basis point contraction in margins. Management anticipates these modest results to continue for several quarters, noting a decline in consumer demand. They cited rising expenses, including startup costs for new projects, as contributing factors. Despite these short-term challenges, demand is expected to be cyclical, and with new cruise ships and park expansions planned in the coming years, there is optimism for long-term growth potential.

Disney is gaining momentum after reporting stronger-than-expected financial results for fiscal Q3 2024, which ended June 29. Revenue hit $23.2 billion, up 4% from the previous year, with 2% growth in Experiences and 4% in Entertainment. Adjusted earnings per share (EPS) jumped 35%, and Disney is committed to cutting $7.5 billion in expenses. CFO Hugh Johnston emphasized aggressive cost-saving measures and continued investment in growth opportunities. The company also increased its full-year EPS guidance, projecting a 30% rise compared to fiscal 2023.

Combined, all of Disney's streaming properties -- which include Disney+, Hulu, and ESPN+ -- reported operating income of $47 million, a big improvement from the $512 million loss in the year-ago period. This was boosted by a revenue jump of 15%.

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