DIS - Disney: Streaming Headwinds De-Risked And New Catalyst Underway - Initiating With A Buy

2024-05-24 12:54:32 ET

Summary

• Disney reported 2Q24 earnings, beating EPS estimates but missing revenue. Stock has dropped over 6% in the past month.
• Management really de-risked itself on this quarter's call after guidance disappointed investors. I think the pullback creates an opening to jump into the next recovery cycle.
• Disney's streaming business is starting to generate profit, and I think expectations should have reset enough this quarter for an outperform later in FY2024.
• In my opinion, Disney's parks and experiences segment isn't given enough attention by investors. I see the segment generating more revenue as management expands offerings.
• I share my thoughts on Disney stock here and why I believe it dipped and is better positioned for more upside in 4Q24.

Investment thesis:

The Walt Disney Company ( DIS ) reported 2Q24 earning results earlier this month. The company reported EPS of $1.21, beating consensus estimates by 8%, but missed revenue by 0.23%. The stock sold off after earnings and is down over 6% over the last month. I see more upside ahead for Disney after the dip. I believe the company has priced in the negatives and managed investor expectations, particularly given its 3Q24 outlook. Management forecasted a loss for Entertainment DTC and expects no core subscriber growth in the third quarter. I'm initiating Disney with a buy rating. In my opinion, there's minimal downside ahead for the stock, but a lot in work for its favor over the midterm. I say buy the bottom or near it....

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