After a bruising year for Walt Disney’s (NYSE:DIS) investors, the company needs a leader with the “eye of the tiger” and the drive to cut costs and build Disney into a streaming standout. I am bullish on DIS stock, as CEO Bob Iger’s vision and passion for the company could make Disney a darling of the financial markets in 2024.
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Disney offers magical experiences with theme parks, films and television programming, toys, streaming services, and more. Yet, there’s been no magic for Disney’s shareholders this year, as the market heavily favored technology stocks over old-school names.
Of course, Disney has been around for a long time and isn’t going anywhere. The market will rotate in and out of sectors and companies, and Disney was out of favor for a while. However, recent events should put Disney’s investors at ease and restore confidence in this iconic American entertainment giant.
Actors’ Strike Deal and Earnings Give Disney a Boost
First of all, the market is more optimistic about Disney’s future because a long-standing Hollywood actors’ strike appears to finally be coming to an end. This is significant for Disney and other U.S. companies that produce and distribute entertainment content.
Here’s the scoop. After an exhausting 118-day strike, the SAG-AFTRA (Screen Actors Guild-American Federation of Television and Radio Artists) reached a tentative agreement with the AMPTP (Alliance of Motion Picture and Television Producers), which represents major studios such as Disney. The agreement is valued at more than $1 billion, and it includes wage increases and a residual “streaming partnership” bonus.
It’s a sign of the times that the contract even includes “extensive consent and compensation protections” from the use of artificial intelligence (AI). What’s most relevant for Disney, though, is that the three-year deal will probably be approved by the SAG-AFTRA board and thereby put an end to the prolonged actors’ strike in Hollywood.
There’s more going on, however, as DIS stockholders got a double-shot (or even a triple-shot) of positive news. Not only is the actors’ union strike coming to an end, but Disney just posted an earnings beat, and Iger plans to ramp up cost-cutting measures at Disney.
There’s a lot to unpack here, but we can start with Disney’s bottom-line results for its fourth quarter of Fiscal Year 2023. Analysts only expected Disney to report earnings of $0.71 per share, but the company actually earned $0.82 per share.
Get Ready for a Leaner Disney in 2024
In addition, DIS stock jumped today, as total Disney+ subscribers reached 150.2 million in Fiscal Q4 2023, beating the forecast of 148.15 million. In other words, Disney’s standing as a content-streaming company is stronger than the critics had probably thought. Still, this might not even be the most important recent news for the company.
I’d contend that the real headline is Iger’s push for cost reductions at Disney. As you may recall, Iger reorganized Disney into three business segments – Disney Entertainment (including streaming), Experiences (theme parks), and Sports (including ESPN).
Now, Iger is implementing powerful measures to make Disney leaner and more cost-efficient. Specifically, Disney has eliminated 8,000 roles at the company, and now Iger is raising his annual cost-reduction target for Disney by $2 billion to $7.5 billion.
Part of this plan includes reducing Disney’s total content spend from around $27 billion in Fiscal Year 2023 to $25 billion in FY2024. Now that the actors’ strike is ending, I expect Disney to be better positioned to achieve its cost-cutting objectives and offer excellent value to DIS stock investors next year.
Is Disney Stock a Buy, According to Analysts?
On TipRanks, DIS comes in as a Moderate Buy based on 18 Buys, five Holds, and one Sell rating assigned by analysts in the past three months. The average Disney stock price target is $105.52, implying 16.7% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell DIS stock, the most accurate analyst covering the stock (on a one-year timeframe) is Michael Nathanson of MoffettNathanson, with an average return of 18.04% per rating and a 65% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Disney Stock?
As you might be able to tell, I’m excited about the investment opportunity with Disney. The company has a chance to bring many reluctant stock traders into the fold under Iger’s leadership in 2024.
Looking ahead, it’s just a question of whether Iger and Disney can execute as a leaner, more competitive entertainment business in the coming quarters. I’m feeling extremely bullish about this, and I certainly feel that investors ought to consider DIS stock.
