There aren't a lot of people taking a long-term view when it comes to Walt Disney (DIS 1.72%). Disney+ is hemorrhaging money, its iconic animation studio is losing its Midas touch, and the company itself is becoming a battleground stock for politicos. This isn't exactly Peak Disney. Check the stock chart.
Disney is just 6% away from hitting a new 52-week low, 13% from its lowest price in nine years. Investors are dismissing the longtime champ of family entertainment and the world's most successful theme park operator based on recent stumbles. The market's short-term approach to the media giant could be your long-term opportunity as an investor.
NYSE: DIS
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Hakuna Matata
Disney has spent decades crafting storybook endings, but can it also be happily ever after for its investors? I recently took a look at where Disney could be a year from now and three years from now. Let's put some sand in that hourglass. Disney in five years -- 2028 -- could be a pretty good place for today's long-term investors.
Let's start at the movies. This isn't Disney's largest business, but it's one that has come under fire lately after a few financially disappointing films. We only know two Disney theatrical releases beyond 2027, a pair of Avatar sequels now slated to come out in the 2029 and 2031 holiday seasons. The next few years will still be flush with potential blockbusters. In 2026 alone there will be eight largely unnamed Marvel, Star Wars, and Pixar movies. There will also be several of Disney's own flicks in the mix.
Disney may never catch lightning in a genie bottle the way it did in 2019 when it had all six of this country's highest grossing films. It's still historically a hit factory. It has an unmatched catalog of franchises, and it has overcome lulls in theatrical animation before. With multiplex audience levels improving again this year and strong streaming opportunities after a film's theatrical run, the climate should continue to get kinder for the world's top content generator.
Image source: Disney.
Moving on to Disney's flagship media networks subsidiary -- this is a business that will look very different in 2028. Folks keep cutting the cord with their local cable or satellite television provider, but Disney has a plan to make up for that fading revenue stream. The House of Mouse is getting serious about premium streaming with the launch of Disney+ in 2019. It has quickly grown to become the world's second-largest premium digital video platform. The problem right now is that Disney's consumer-direct streaming offerings are losing a lot of money, more than $4 billion just in fiscal 2022. CEO Bob Iger has made turning the service profitable by the end of next year a top priority. It's making dramatic cost cuts while also telegraphing another price hike later this year for its ad-free tier. If it's able to retain its fans while also getting them to pay more in the coming years this segment can go from being an albatross to a key driver again before 2028.
Then there are Disney's theme parks. All but two of the world's 10 most visited gated attractions carry the Disney banner. This has surprisingly been Disney's most resilient segment coming out of the pandemic, and it's the one business that has now exceeded pre-pandemic revenue and operating profit high-water marks. Can Disney keep the turnstile clicks coming with high-quality revenue? A big test will come in 2025 when its largest rival in Florida opens an entirely new theme park complete with a few more hotels at Universal Orlando. Disney has historically moved slowly to build out its empire, but by 2028 it may need a new theme park in Disney World to compete or at the very least update and expand its existing offerings.
Disney beating the market in the next five years will ultimately come down to one thing, and that is how it handles the crown transfer. Bob Iger returned as CEO in November, but his plan is to retire again by the end of next year. He might be persuaded to stick around for another year or two if his results are bearing fruit, but he is unlikely to be at the helm by 2028. Disney's transition at the top will be critical.
The media stocks bellwether is attractively priced at its current state, especially since bottom-line improvements are coming. It will take a few years before Disney posts record earnings per share to match its current record on the top line, but Disney should return as a market darling by then. It's trading for less than 10 times projected earnings in fiscal 2028, and those are depressed profit targets. Disney is being challenged at the moment, but it won't be down forever. Have you not seen how most Disney animated features end as the music swells and the credits roll? You get it.
