Disney Stock: Experiences Drive Growth, Streaming Prospects Strong
The Walt Disney Company released its fiscal third-quarter earnings report on August 5. Morningstar analysts analyzed the results and provided their take on whether Disney stock is a buy, sell, or fairly valued.
In the quarter, Disney reported 7% sales growth, driven by experiences and streaming. Experiences accounted for 40% of revenue and 54% of operating profit, while entertainment streaming contributed 22% and 13%, respectively. Free cash flow remained strong at $3 billion, with the company investing in share repurchases.
Morningstar's analysis focuses on Disney's experiences business, which they believe will accelerate as the economic backdrop improves. The segment saw a 10% sales increase due to domestic patron growth and new cruise ships. However, international visitors to US parks remained depressed.
The streaming business reported an 11% rise in sales despite weak ad pricing. Operating margins nearly doubled to 12.9%. Morningstar believes that Disney's irreplaceable characters will continue to drive a healthy experiences business worth nearly as much as the market values the whole firm.