Prediction: Disney Will Beat the Market. Here's Why.

After several years of market underperformance, Walt Disney (NYSE: DIS) finally came to play in 2024. The shares rose 24% last year, roughly in line with the previously elusive S&P 500. Now that the entertainment giant was finally able to meet the market, it's time to beat the market in 2025.

A lot of things can go right for Disney in the new calendar year. Let's look at some of the catalysts that could turn a market laggard over the last four years into a leader.

You can't spell mouse with "mo"

Momentum is on Disney's side these days. Many of its recent shortcomings are now leading the way. After a rare showing in 2023 when it was not the box office champ, the studio put out the three highest grossing movies of 2024. The Disney led streaming segment that just a couple of years ago was posting billions in annual operating losses turned profitable earlier than expected. Its market-leading theme parks that were shut down for a long time early in the pandemic are more lucrative now than they were before the global COVID-19 crisis.

With Disney's market cap now back above $200 billion, the optimists are finally starting to be rewarded with the fairy tale finish that was elusive in recent years. Things aren't perfect. Revenue growth has been in the single digits for four of the last five fiscal years. The turnaround since Bob Iger returned as CEO has been focused on the bottom line.

Disney has topped Wall Street profit targets in each of the four quarters of fiscal 2024. Net income is growing a lot faster than the top line. Revenue inched a mere 3% higher last year for the House of Mouse, but adjusted earnings scored a 32% jump in fiscal 2024 with a 39% surge in its latest report.

Image source: Disney.

The good and the bad of 2025

Iger has completed most of the operating optimization that he was hoping to achieve before he steps down near the end of next year. This year may seem rather ordinary on paper. Analysts are modeling just 4% in revenue growth in fiscal 2025. Disney's guidance calls for adjusted net income to rise in the high single digits.

There will be more seed planting than harvesting at Disney this year. It's in the process of building out massive expansion projects at both domestic theme parks that will bear fruit when they open in the next few years. Now that Disney is one of the few legacy media companies with a profitable streaming platform it can start to lay the groundwork of scalability for Disney in the future.

Disney will add another cruise ship to its fleet later this year. It has announced major additions to its premium cruise line twice over the last six months. This is more important than you think. If Disney shares rising 24% in 2024 is applause-worthy, the country's three largest cruise lines soared an average of 47% last year. The industry almost doubled Disney's stock return, even though Mickey Mouse is growing his fleet the fastest.

Heading out to the local multiplex, Disney will have fresh installments in the Captain America, Zootopia, and Lilo & Stitch franchises hitting theaters in 2025. However, it's going to end the calendar year with what should be the largest film of the year. Avatar: Fire and Ash will roll out in December. The first two movies in James Cameron's series are among the three highest-grossing films of all time.

Is Disney stock cheap right now? The leisure tastemaker is trading at a reasonable 20 times this year's adjusted earnings estimate. Disney itself sees a return to double-digit bottom-line growth in fiscal 2026 and fiscal 2027. Safeguarding against fumbling the CEO transfer this time around, Disney's board has said it will announce Iger's successor early next year.

Headwinds are becoming tailwinds. With valuations extended for many of the recent market tech leaders, Disney is emerging as a compelling flight-to-safety play in 2025. It knows it needs to stick the landing this time, and investors are ready.