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3 Reasons To Buy Disney Stock, And Why You Should Buy It In January
Walt Disney (NYSE: DIS) investors who were confident about a rebound in 2024 got a kind of rebound. Disney stock gained 24.5% last year, and I include that half percent because it was just a half percent off the S&P 500's 25% gain. That's not too bad, but not exactly magnificent.
Are Disney's better days over? I don't think so. I don't expect Disney to run circles around the broader market, but I do expect it to keep its top spot in entertainment and media, increase its dividend, and create shareholder value. Here are three reasons to buy it, and another reason to buy it right now.
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1. Streaming is now profitable
As the leading global content creator, it's not surprising that Disney has developed one of the most competitive streaming platforms in the world. That includes Disney+ as well as Hulu and ESPN+. It has been one of the top media companies for decades, with a portfolio that includes the ABC network and several smaller networks, but it made an early switch to streaming in 2019.
That switch proved providential when the pandemic forced people inside just a few months later, but the accelerated rollout weighed on the bottom line for too long. Disney+ quickly catapulted to the top of streaming, but it took until this past summer to report a profit.
In the 2024 fiscal fourth quarter (ended Sept. 28), entertainment streaming, which excludes sports, reported $253 million in operating income, up from a $420 million loss last year. Total streaming operating income was $321 million.
The company ended the quarter with $174 million total streaming subscriptions, including 120 million core Disney+ subscriptions, 4.4 million more than last year. The ad-supported platform contributed 14% of the growth. Management is expecting an $875 million increase in entertainment streaming operating income in 2025.
Earnings per share (EPS) for the year increased from $1.29 to $2.72, and management is guiding for a low increase in adjusted EPS for 2025.
2. Disney has expected hits in the pipeline
Disney is a huge company with many different moving parts. In general, the system works well because even if one part isn't pulling its weight, the others can make up for it. When it all works together, it's a beautiful symphony worthy of a Disney smash hit.
Speaking of smash hits, Disney, through its various top studios, is expecting several blockbuster releases coming up. The company typically accounts for many of the top films in any given year, giving it an unrivaled lead in the film industry. In 2024, it had the three top-grossing films worldwide, Inside Out 2, Deadpool & Wolverine, and Moana 2, plus No. 7, The Lion King: Mufasa, which was only recently released.
It has 10 films slated for release in 2025, and most of them are sequels or based on previous content. They include Avatar: Fire and Ash and the live-action Snow White, and it already has more expected blockbusters into 2028, with another Avatar coming out in 2026 and the third Frozen movie in 2027.
Disney's model is to create compelling content and then milk it for all it's worth with more content based on the same characters, both in theater and streaming, plus park rides, products, and more. It actually releases very little completely new content, and when it does, it's with the hope that it will be another moneymaking franchise.
3. Parks are performing
Parks are the standout Disney assets because they are unparalleled anywhere in the world. Although you might say the same for Disney's content library, it still has competition from other film studios and streamers, while the parks and experiences are in a class of their own. In some ways, they're the glue that holds the model together and makes Disney a differentiated leader. Fans see the shows and buy the products, but visiting a Disney park can be a once-in-a-lifetime (or more for loyal fans) experience that makes the magic happen.
The parks and experiences segment was mediocre in the fourth quarter, with a 1% sales increase and 6% operating income decrease. Management is expecting that to pick up as the American consumer becomes stronger, and Disney is invested in new rides and experiences, like themed resorts and cruises, to benefit from a strengthening customer down the line.
Last thing -- why now
Disney reports earnings on Feb. 5. As the company turns a corner on streaming profits and expects a strong parks consumer, there's a good chance the news will be positive. But don't buy it for a post-earnings jump; there's no guarantee of that. Consider Disney stock for its industry-leading position. Its recently reinstated dividend doesn't hurt, either.
Don’t miss this second chance at a potentially lucrative opportunity
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On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of January 21, 2025
Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
