Key Morningstar Metrics for Walt Disney

• Fair Value Estimate: $125.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Walt Disney’s Earnings

Walt Disney DIS reported an excellent end to fiscal 2024, with very encouraging results and commentary surrounding the streaming and experiences businesses, both of which are critical to a healthy future. The strong performance of sports content allowed the legacy television business to hold up better than we expected in 2024, and the impact of legacy television on the overall results is becoming less critical. We have growing confidence that Disney has successfully evolved for the modern era, and we are raising our fair value estimate to $125 per share from $115.

For the full fiscal year, Disney’s revenue was up 3%, but its operating profit jumped 21%, mostly because the streaming business is no longer the huge drag it was through last year. Even better, the firm’s long-term outlook implies profits will continue to ramp. The firm expects high-single-digit growth in earnings per share and operating cash flow in 2025 and an acceleration to double digits the following year. We believe forthcoming revenue associated with recent investments in streaming and experiences will drive this result.

Most importantly, Disney seems to have turned a corner toward robust streaming profitability while maintaining healthy growth. Total direct-to-consumer operating income hit $321 million in the fourth quarter after reaching profitability for the first time last quarter, with $47 million in operating income. The firm kept DTC quarterly expenses mostly flat year over year while revenue grew 14%. Between Disney+ and Hulu, Disney added more than 5 million subscribers during the quarter, including about 2 million in the US. We expect the launch of the flagship ESPN streaming service in late fiscal 2025 to further bolster streaming results, though we expect some additional initial costs. However, excluding sports streaming, management expects DTC operating income to exceed $1 billion in fiscal 2025, up from $143 million in 2024.

The Walt Disney Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.

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