Momentum Shift in Motion for Disney Stock: Time to Buy?

Key Points

• After a challenging year, Disney has rebounded, climbing 25.5% YTD, driven by robust Q4 earnings and strong positioning that suggests further growth potential.
• Q4 revenue grew 6.3% year over year to $22.57 billion, and EPS surpassed expectations as Disney's streaming division swung to profitability.
• Domestic parks and experiences have grown steadily, driving operating income, with future projects promising sustained growth despite international challenges.

Walt Disney Co. NYSE: DIS is one of the world’s second-largest entertainment companies, with a market capitalization of $205 billion. It is a household name synonymous with childhood nostalgia. Today, the entertainment giant spans diverse demographics and operates globally through its two main segments: Disney Media and Entertainment Distribution and Disney Parks, Experiences, and Products. 

After lagging most of the year, Disney's stock has staged an impressive recovery, up 25.5% YTD, slightly trailing the SPY ETF. Following a strong Q4 earnings report on November 14, shares have risen over 20% this quarter, consolidating above key moving averages near significant resistance. This momentum shift raises a key question: is it time to buy into the entertainment giant as it appears poised for a breakout? 

Momentum Shift Drives Renewed Confidence

Disney shares hit a 52-week low of almost $83 in August after a sharp selloff from their April highs of $120. However, recent developments, including better-than-expected Q4 results, have helped the stock recover, bolstering investor confidence.

The company’s Q4 earnings showcased its turnaround. Revenue grew 6.3% year over year to $22.57 billion, topping estimates, while EPS of $1.14 exceeded expectations by $0.05. Highlights included strong box office performances, profitability in streaming, and record revenue in its experiences segment despite challenges in international parks. This improvement has sparked renewed optimism about Disney's ability to navigate market challenges and unlock future growth opportunities. 

Streaming Profits and Box Office Success

Disney's streaming division, including Disney+, Hulu, and ESPN+, swung to profitability, with a $321 million operating income in Q4 compared to a $387 million loss a year earlier. Subscriber growth was modest, but streaming losses have significantly narrowed. Double-digit operating income growth is expected in 2025 and beyond. 

Meanwhile, blockbuster hits like Inside Out 2 and Deadpool & Wolverine set records, adding to the entertainment segment's 14% revenue growth year over year. These successes reaffirm Disney's box office dominance and demonstrate its ability to capitalize on premium intellectual properties, a competitive edge in an increasingly fragmented media landscape. However, challenges persist in traditional TV networks, with revenue and profits declining as consumers favor streaming over pay-TV bundles.

Parks and Experiences Provide Stability 

Disney’s domestic parks and consumer products business grew 1% yearly to $8.24 billion, with higher guest spending and increased cruise line activity driving a 5% boost in operating income. Despite headwinds at international parks, Disney remains committed to expanding its experiences segment, signaling confidence in its long-term potential. Future projects, including park expansions and new attractions, are expected to drive sustained revenue growth as consumer demand for unique experiences remains robust.

Bullish Outlook But Insider Selling Sparks Caution 

Analysts remain bullish despite a series of insider stock sales, including CEO Bob Iger’s $42.6 million share disposal in Q4. Of the 25 ratings, 19 are Buys, and the consensus price target suggests an upside of over 9%. From a technical perspective, the stock’s consolidation near $118 indicates the potential for a breakout. A move above this resistance could confirm a higher timeframe uptrend and bolster momentum further.

With improving fundamentals, positive sentiment, and favorable technical positioning, Disney presents a compelling case for investors seeking exposure to the entertainment sector. However, insider selling and challenges in traditional media warrant monitoring as the company continues its transformation under Bob Iger’s leadership.