Disney Stock: What Smart Investors Know

(CTN News) – Over the past two-and-a-half years, Walt Disney (DIS 3.88%) has been on a roller coaster of a ride (perhaps Space Mountain?). Added those to a CEO saga that includes an ousting and a return just six weeks later, and you’ve got the makings of a hit.

It’s real life, and investors use the fast-paced drama to inform their decisions. What do smart investors know about this blue-chip industry leader? Take a look.

1. Various revenue streams balance each other out

It’s easy to follow Disney’s revenue, which has fluctuated since COVID-19 started. Investors are probably relieved that it’s finally above pre-pandemic levels.

Disney’s revenue is made up of many different things, though. Disney had four separate segments before reorganizing in 2021. Media and entertainment distribution, parks, experiences, and products were consolidated. Iger said they’d change again.

Since has such a diverse revenue stream, the overall business has rebounded. Despite a big decline at the beginning of the pandemic, revenue is steadily increasing, but it’s not in the same segments.

While people were under lockdown, streaming drove sales. In the 2021 second quarter (ended April 3), park sales fell 44%, while direct-to-consumer revenue rose 59%. Just over a year ago, Disney+ had a 209% increase in subscriptions.

In the most recent fourth quarter of 2022 (ended Oct. 1), parks revenue was up 36%, while direct-to-consumer was up only 8%.

2. It can raise prices on its exclusives

Companies are struggling to balance raising prices and increasing costs due to inflation. In that sense, Disney doesn’t seem to be struggling.

From streaming to parks, Disney has raised prices. The ad-supported tier of Disney+ remains at the lower price of $7.99 per month. That tier should make up for its lower price with ad revenue. Because investors are soured on such huge losses, the price hike is crucial.

3. Cash flow has dropped a lot

Don’t you think this list wasn’t going to be all positive? Take a look at cash flow and net income.

While sales have surpassed pre-pandemic levels, free cash flow and net income are still way down.

When the pandemic started, Disney raised cash. As of yet, it hasn’t reinstated its dividend. Conversely, Disney remained cash-flow positive despite losing money in 2020. Strong businesses do that.

Positives outweigh negatives here, right? Definitely. Almost every company has warning signs and red flags. Afterward, they put them in context to see if good practices and opportunities outweigh those flags.

There’s a lot of potential for Disney. It’s a smart time to buy with its stock down 40% in the last year.

Now’s the time to invest $1,000

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