Disney Stock: Is DIS Still a Buy after Rallying 18% in a Month?

Disney (DIS) shares have risen over 18% in the last month, and much of that rally has come after the company released its fiscal Q4 2024 earnings earlier this month. The company not only posted better-than-expected earnings for the quarter, but also provided upbeat guidance for the next couple of years.

Despite the recent rally, Disney still trades below its 2024 highs. In this article, we’ll discuss whether DIS stock is still a buy, and whether the stock can rally further into 2025 - beginning with a snapshot of its recent earnings.

Disney Guided for Double-Digit Earnings Growth

During the fiscal Q4 earnings call, Disney forecast “high single-digit” adjusted earnings growth in the current fiscal year. For the fiscal years 2026 and 2027, it projected double-digit earnings growth.

Disney’s combined streaming business, which includes Disney+, Hulu, and ESPN+, generated an operating income of $321 million in the fiscal fourth quarter. The segment has come a long way, as its quarterly losses peaked at around $1.5 billion in the final quarter of its fiscal year 2022. Within two years, the streaming business has become a net contributor to Disney’s operating profits, instead of the drag it once used to be.

Disney is Targeting Double-Digit Streaming Margins

Disney expects its streaming business to eventually post double-digit margins like Netflix (NFLX), and during the fiscal Q4 earnings call, it outlined the building blocks to reach that milestone. These are:

• Continued subscriber growth
• Increase in pricing
• Improving product features to increase engagement and reduce churn
• Monetization of ad-supported tier
• Growth in its international operations

Disney Follows Netflix’s Strategy

Disney has been following in Netflix’s footsteps, and launched an ad-supported tier. During the fiscal Q4 earnings call, Disney CEO Bob Iger accidentally revealed numbers about its ad-supported tier and said that around 60% of new subscribers in the U.S. are for the plan. He also added that around 37% of the total subscribers in the country are now on the ad-supported plan, while the number is 30% globally.

According to Iger, Disney bumped up the price for its standard plan to push more people into the ad-supported plan, as the company makes higher average revenue per user (ARPU) on the tier.

Like Netflix, Disney has also started to crack down on password sharing. The strategy paid off quite well for Netflix; while it initially saw some adverse reactions from customers in the form of cancellations, its subscriber count has since risen steadily.

DIS Stock Forecast

Sell-side analysts are bullish on Disney, and the stock has received a consensus rating of “Strong Buy” from the 29 analysts in coverage. Its mean target price of $125.92 is almost 10% higher than yesterday’s closing prices, while the Street-high target price of $140 is a 22% premium.

In terms of valuation, Disney trades at a next 12-month (NTM) price-to-earnings (PE) multiple of 21.1x, which - while not being exactly mouthwatering - looks reasonable, considering where broader market valuations stand. Moreover, Disney brings the prospects of double-digit earnings growth to the table in the fiscal years 2025 and 2026.

Disney’s turnaround under Iger is showing results, which is clearly visible in the box office performance of its movies. Its “Inside Out 2” became the highest-grossing animated movie of all time, surpassing what else but its own “Frozen II.” Disney’s “Deadpool & Wolverine” also became the highest-grossing R-rated film of all time – a title previously held by Warner Bros. Discovery’s (WBD) “Joker.”

The importance of Disney’s box office success cannot be understated, and goes way beyond the box office contributions to its earnings. In-house quality movies add to Disney’s streaming content slate and make the offering even more valuable for subscribers. The company has created some very iconic characters that have helped build an aura around its brand. Successful movies – especially the animated ones – also lead to more people wanting to come to Disney’s parks.

While there are concerns over its Parks segment in the short term, the company has committed to invest $60 billion over 10 years towards the segment to add new attractions, among other initiatives. Disney is also gearing up for a 2025 launch of the ESPN streaming service. Sports streaming could be among the key growth drivers for Disney going forward.

Overall, I believe Disney has several drivers to drive both the top-line and bottom-line growth over the next few years, which - coupled with reasonable valuations - make it a stock worth considering for 2025.