Why Walt Disney Stock Popped Earlier Today

What happened

After a string of disappointing earnings reports this year from leading streaming services, Walt Disney (DIS 5.79%) delivered exactly what investors were looking for.

Disney shares were up 7% as of 10:50 a.m. ET after the company posted a 28% increase in revenue over the year-ago quarter. Growth was driven by all business segments, especially the parks, experiences, and products segment, as well as direct-to-consumer streaming services. 

Disney+ had another great quarter, adding 14 million net new paid subscribers. With the addition of the Hotstar service in India, total Disney+ subscribers reached 152 million.  

So what

Disney had been reporting strong results all year, especially within the parks, experiences, and products segment. Disney+ had also seen a healthy increase in subscribers in the previous quarter, but that hadn’t kept the stock from tumbling to new lows as market sentiment remained deeply negative through the first half of the year. 

The post-earnings pop has more to do with Disney’s low valuation and investor expectations entering the quarter than anything else. At its 52-week low of $90.23, Disney stock was trading at its lowest price-to-sales ratio in the last five years, and the perfect antidote for weak stock performance is more growth from the underlying business. Disney certainly delivered on that score.

Now what

The theme parks segment reported a revenue increase of 70% year over year, but management still sees indications of robust demand. During the earnings call, Chief Financial Officer Christine McCarthy mentioned that near-term hotel bookings and intent to visit are roughly in line with levels before the pandemic. 

Management also expects Disney+ subscriber additions to accelerate modestly in the fiscal fourth quarter ending in September, specifically in the domestic market. 

Overall, Disney is on schedule with its long-term streaming ambitions, in addition to growing the parks business through recent digital improvements and feature attractions.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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