The New Year Is Almost Here and Disney Has an Exciting Present for Shareholders

Tired Disney (NYSE: DIS) shareholders are finally getting a break from their disappointment. Disney stock, which has been on the way down for a few years, perked up recently, and it's gained 16% over the past month.

It's a nice gift for shareholders as we get closer to 2025. To sweeten it even more, management just raised the dividend by 33% to $1. It looks like the situation is improving. Is now the time for new investors to jump in?

Wishing upon a star

Let's not get carried away with Disney's gain; at the time of this writing, Disney stock remains 42% off of its five-year highs. Investors are getting excited again, but there's plenty of work to do to earn the market's confidence and manifest a total rebound.

CEO Bob Iger does seem to understand what needs to happen to make the Disney machine work, although things were in motion before he came back two years ago. Revenue is up, parks are swinging, and most importantly, streaming is finally profitable.

Sales increased 6% year over year in the 2024 fiscal fourth quarter (ended Sept. 28), and earnings per share (EPS) were up 79% to $0.25. Parks were up a modest 1% over last year, but entertainment, which is basically all of the Disney media, was up 14%.

Streaming operating income was $321 million and profitable for the first time. Entertainment streaming, which doesn't include sports, was already profitable in the third quarter. But the combined effort is now making money, an achievement the market has been waiting for.

Disney Core streaming subscriptions increased by 4.4 million to 122.7 million in the fourth quarter, but there was an extra push from the new ad-supported tier, and streaming ad sales increased 14% year over year in the quarter. With Hulu, entertainment streaming subscriptions were 174 million. Turning hits into profits.

It makes sense that the market rewarded Disney's blowout quarter with a strong gain. But all the pieces have to work together to make the Disney magic, and it needs to be over a sustained period of time to earn more market enthusiasm.

Let's be clear: The increase in revenue was positive, but it wasn't excellent. And the improvements in profitability were just that -- improvements. However, net income is still 37% lower than it was 10 years ago. That's why it has been so crucial to get streaming to become profitable and why management is giving a profitability outlook into 2027.

For 2025, it's guiding for adjusted EPS to increase in the low-single digits and for entertainment streaming operating income to more than triple. For 2026, it expects adjusted EPS and entertainment streaming operating income to grow by double digits. For 2027, it's guiding for double-digit growth in adjusted EPS.

Making some of that Disney magic

Here's what it has going for it right now: It released the two top movies of the year over the summer, Inside Out 2 and Deadpool & Wolverine. They have kept their top places, even through recent competition from Universal's (owned by Comcast) Wicked. And now Moana 2, which was released last week, has taken the record for the highest-grossing Thanksgiving five-day opening and has landed in the No. 5 spot.

Iger noted that every film Disney produces achieves that much more for Disney as a whole because all of its content and characters are increasingly monetized with park rides, streaming content, products, and more. The first Moana, in fact, is the most-streamed movie ever.

It's not done yet for the year. Mufasa: The Lion King is expected to be another blockbuster, and it has a compelling slate of films for 2025 and even after.

When all of Disney's parts work together, it's quite a force. It enjoyed that kind of lead for many years, and it's still getting back up there. It has an enviable content library, the top parks globally, and a creative machine that keeps churning out top hits.

Disney is well positioned for further growth in 2025, but it certainly comes with some risk. If you have some risk tolerance and a long time horizon, you might want to take a small position.

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Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.