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Walt Disney (DIS) has seen a dramatic shift from its earlier success this year. After a peak in March with shares trading 38% higher, the stock has since declined, moving lower year-to-date. With its current trajectory, Disney needs a significant catalyst to regain momentum, which could potentially come from two key events this week.
On Wednesday, Disney (NYSE:DIS) is set to release its financial results for the fiscal third quarter ending in June. This report is crucial for assessing the company’s recent performance and its outlook for the near future.
Additionally, Disney is gearing up for a major fan event later in the week. During this event, the company is anticipated to unveil new theme-park projects, theatrical releases, and show announcements. This could be an opportunity for Disney to shift its current trajectory and reestablish itself in the market.
A Strong Start to 2024
The beginning of 2024 was promising for Disney, marked by several high-profile announcements in February:
- The company projected annualized cost savings exceeding $7.5 billion by the end of the fiscal year, up from $5.5 billion the previous year.
- Disney made a significant $1.5 billion investment in Epic Games, known for Fortnite, signaling a push into new video game ventures.
- A $3 billion share buyback was announced, the first since 2018.
- The semiannual dividend was increased by 50%, marking a return to dividend payments after the pandemic.
- A planned Disney+ Moana series was upgraded to a theatrical release for the Thanksgiving holiday.
- ESPN announced a sports-streaming bundle in collaboration with other major sports programming entities.
- Taylor Swift’s record-breaking concert film was slated for an exclusive Disney+ release in March.
These announcements were strategically timed to bolster share prices and enthusiasm ahead of a critical shareholder meeting in early April, where Disney successfully fended off activist investors.
The Need for a Positive Update
Despite the high-profile moves, Disney’s fiscal second quarter was underwhelming, leading to a cautious outlook for the fiscal third quarter. Analysts are forecasting revenue of $21.1 billion, a 5% decline from the previous year. They also anticipate a profit of $1.09 per share, reflecting a modest 6% increase. The previous forecast had anticipated a profit of $1.27 per share, which was later adjusted to $1.18.
Disney faces several challenges impacting its performance. Although "Inside Out 2" and "Deadpool vs. Wolverine" have been successful, their contributions will be reflected in future reports rather than the current quarter. Rising labor costs at domestic theme parks and challenging year-over-year comparisons with past milestone celebrations at Disney World and Disneyland are expected to weigh on the company's financials. Additionally, while Disney+ showed early profitability, a return to losses is anticipated before achieving sustained profitability.
