KEY POINTS
- Even though Disney’s streaming services have attracted millions of new users, their prices have skyrocketed.
- Longtime CEO Bob Iger is back at the leadership of Disney, and he has challenged himself to put the company on the right track within the next two years.
- Iger will have to make rapid progress, but if he is successful, that should lead to an increase in the stock price.
The shares of the massive company in the entertainment business dropped by more than forty per cent in the past year.
These days, shares of Disney (DIS 3.61%) are performing anything but magically. The entertainment company’s stock had fallen to the same low levels that it reached early on in the epidemic when its theme parks were shuttered, and the market was in a state of fear. The previous year has been difficult for Disney due to rising costs, which were partly driven by the company’s significant investments in its streaming services. The share price of the company’s stock now hovers around $100. (Also Read: How to Start a Handbag Business From Home)
But better times are around the corner. Recent events at Disney have taken many by surprise, including the company’s decision to reinstate longtime Chief Executive Officer Bob Iger. His objective for the next two years is to steer the organization back on course and select a new leader. Iger should make significant headway in the coming months, even though he has limited time to get things done. His efforts may help Disney reach $125 in 2023.
A risky investment in online streaming
First, let’s examine the predicament in which Disney currently finds itself. The corporation is placing significant importance on its performance in the streaming industry. In terms of membership, things are moving in the right direction. During Disney’s fiscal year 2022, which concluded on October 1, the company attracted 57 million subscribers to its streaming services, bringing the total number of customers to 235 million. These services include Disney+, ESPN+, and Hulu.
The operational loss for the segment increased from $1.6 billion in fiscal 2021 to $4 billion for fiscal 2022 due to rising expenditures associated with the programming, production, and marketing of content on Disney+ and Hulu. Also experiencing a decline was Disney+’s average monthly revenue per paid subscriber.
During the earnings report in November, now-former CEO Bob Chapek stated that the business still anticipates Disney+ to achieve profitability in the fiscal year 2024, provided that economic conditions do not deteriorate further.
During the darkness, there is a ray of hope. Continued expansion can be seen in Disney’s parks, experiences, and goods division, which has traditionally been the company’s most important source of revenue. Its annual sales increased by 73% to more than $28 billion over the period in question. In addition, demand for Disney’s theme parks remained high throughout the fiscal year. They remain the parks that receive the most visitors anywhere in the globe. (Also Read: How to Start a Printing Business at Home: A Beginner’s Guide)
Even before Iger’s return, Disney had planned to raise the costs of its streaming services, and the company had recently implemented a new pricing structure and ad-supported subscription options. The corporation also stopped employing new employees for specific positions and took steps to reduce key operational costs, such as the amount spent on travel.
At the beginning of Iger’s tenure
Iger stated that he would begin his first few days on the job by investigating the corporation’s cost structure. He intends to refrain from making significant investments to acquire new streaming subscribers if adding those subscribers will not increase earnings.
Additionally, he intends to refocus Disney on its creative side. Iger has just implemented a new policy that requires employees to report to the office four days per week. According to Iger, this change encouraged creativity and improved communication. The Chief Executive Officer (CEO) aims to enhance the overall quality of the theme park experience by making certain services, such as parking for resort guests, available free of charge.
What kind of reaction have the shares gotten? In the days immediately following Iger’s appointment, they increased by almost 6%. Since then, investors have chosen to wait for proof that they can turn things around at the company before making any decisions. Let’s get back to our initial question. Will Disney reach $125 million in revenue this year?
During the first 15 years of Iger’s tenure as CEO of Disney, the company’s share price increased by almost 400%, while earnings also increased. It is also cool to remember that Disney’s share price has, on average, increased in value whenever the company’s revenues and net income have improved.
In the second half of 2020, when sales began to rebound from the early-pandemic slump it had experienced, Disney’s share price soared.
A 30% gain?
This year, Disney would need around a 25% increase in revenue to reach $125 per share. That seems feasible, provided that the corporation can begin showing signs of improvement in cost control and that the improvement is reflected in forthcoming financial reports. Iger has a successful track record at Disney, so I hope he can assist the corporation in making it through the challenging times that are currently occurring.
So, should one invest in Disney? The current price of Disney stock is 22 times forward earnings expectations, which is down significantly from more than 40 times a year ago. This comes after a more than forty per cent decline during the previous year. The stock is trading at a ridiculously low price when one considers the success of the Disney Parks & Resorts theme park industry and the recent initiatives taken to reduce expenses and stimulate growth. Disney’s magic may return very soon. And this time, it may stick around.
Summary:
Disney’s streaming services have garnered millions of customers, but their costs have skyrocketed. Longtime CEO Bob Iger has returned to the helm and aims to turn Disney around in two years. If Iger succeeds, shares will rise. The entertainment giant’s shares fell almost 40% last year.
Expensive streaming bet
Disney is banking on streaming success. Membership is growing. In fiscal 2022, which ended Oct. 1, Disney attracted 57 million subscribers to Disney+, ESPN+, and Hulu, increasing the total to 235 million. Disney+ and Hulu’s programming, production, and marketing costs increased the segment’s operating deficit from $1.6 billion in fiscal 2021 to $4 billion in fiscal 2022. Disney+’s average monthly paid membership revenue dropped.
Iger’s debut
Iger promised to analyze the company’s cost structure in his first days. He will actively invest in streaming subscribers once they boost earnings. He wants to concentrate Disney on creativity. Iger recently reinstated four-day workweeks to encourage creativity and communication. Free resort guest parking is another way the CEO can improve the theme park experience.
Disney: $125 this year? Disney’s share price and earnings rose 400% over Iger’s 15-year term as CEO. Disney’s share price has usually risen when sales and net income rise. Disney’s share price rose when revenue recovered from the pandemic in 2020.
Disney shares may reach $125 in 2023, but a lot can happen in a year. Iger’s efforts to manage the pandemic’s impact on the corporation and streaming services are uncertain. If Disney can develop its streaming services and decrease costs, Disney shares may reach $125 next year. (Also Read: The Role of Artificial Intelligence in Innovative Business Solutions)
