## Disney Stock: Is it a Hold or a Buy? A Deep Dive into Key Factors
Walt Disney (DIS) is a stock that’s consistently attracting attention from investors. But is it a good time to buy Disney stock? To help you make an informed decision, let’s dive into the key factors that could influence its near-term performance.
Recent Performance:
Over the past month, Disney shares have returned -1%, slightly underperforming the Zacks S&P 500 composite’s +2% gain. While the Zacks Media Conglomerates industry, which Disney falls into, has gained 0.6% during the same period, Disney’s performance has been lagging behind.
The Importance of Earnings Estimates:
At Zacks, we believe that the key to understanding a stock’s future direction lies in evaluating the changes in a company’s earnings projections. We prioritize this approach because we believe the fair value of a stock is ultimately determined by the present value of its future earnings stream.
Analyzing Disney’s Earnings:
For the current quarter, analysts expect Disney to post earnings of $1.09 per share, representing a significant year-over-year increase of +32.9%. The Zacks Consensus Estimate for this quarter has increased by +1% over the last 30 days. For the current fiscal year, the consensus earnings estimate stands at $4.93, indicating a year-over-year change of +31.1%. However, this estimate has slightly decreased by -0.2% over the last 30 days.
Looking ahead to the next fiscal year, the consensus earnings estimate of $5.10 suggests a +3.4% growth from the previous year. This estimate has experienced a -0.7% decline over the past month.
Zacks Rank: A Powerful Tool for Evaluating Stock Direction:
Our proprietary stock rating tool, the Zacks Rank, offers a comprehensive picture of a stock’s potential price direction in the near term. It effectively leverages the power of earnings estimate revisions and other key factors to assign a ranking to each stock.
Based on the recent changes in the consensus estimate and other factors, Disney currently holds a Zacks Rank #3 (Hold). This ranking suggests that Disney may perform in line with the broader market in the near term.
Revenue Growth: A Crucial Factor:
While earnings growth is a vital indicator of a company’s financial health, revenue growth is equally critical. Without consistent revenue growth, sustained earnings growth is nearly impossible.
Disney’s Revenue Projections:
For the current quarter, analysts expect Disney to generate revenue of $22.6 billion, indicating a year-over-year growth of +6.4%. For the current and next fiscal years, the consensus revenue estimates stand at $91.39 billion and $94.86 billion, respectively, indicating growth rates of +2.8% and +3.8%.
Recent Results and Surprise History:
In the last reported quarter, Disney generated revenue of $23.16 billion, marking a +3.7% year-over-year increase. The company’s EPS for the same period reached $1.39, compared to $1.03 a year ago. These results surpassed the Zacks Consensus Estimate of $22.91 billion by +1.06% for revenue and exceeded the EPS estimate by +15.83%. Importantly, Disney has beaten consensus EPS estimates in each of the trailing four quarters and topped consensus revenue estimates twice during this period.
Valuation: Understanding the True Value:
No investment decision is complete without considering a stock’s valuation. It’s crucial to determine whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects. Comparing a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), with its historical values and peers can shed light on whether the stock is fairly valued, overvalued, or undervalued.
Disney’s Valuation Grade:
Disney is graded C by the Zacks Value Style Score, a component of the Zacks Style Scores system. This grade indicates that Disney is currently trading at par with its peers. It’s important to explore the specific valuation metrics contributing to this grade for a more detailed understanding.
Conclusion:
While the information presented here and further insights available on Zacks.com can help you decide whether Disney warrants your attention, the Zacks Rank #3 (Hold) suggests that Disney might perform in line with the broader market in the near term.
Ultimately, making an investment decision about Disney requires careful consideration of these factors and your own investment goals and risk tolerance.
