A lot of news has come from The Walt Disney Company (NYSE: DIS) this month, with a highly anticipated earnings release posted on Aug. 7 and its annual D23 fan event held just days ago. Much of its announcements have been positive, with the company beating earnings expectations and turning a profit in streaming for the first time.
Encouraging growth and multiple box office wins have led Disney's executives to make a move that illustrates a vote of confidence in the company's future. In the coming years, it will make a hefty investment in the United Kingdom and continental Europe to produce movies and television shows for the big screen and its streaming platform, Disney+.
The decision comes after two mega wins at the box office. Disney was the only company to earn $1 billion in ticket sales this year, and it hasn't just done this once in 2024, but twice. The company has come back strong this year and could be on a promising growth path.
So, here's everything you need to know its game-changing move and why its stock is a no-brainer buy right now.
Disney is making a major investment in Europe
News broke on Aug. 9 that Disney will spend at least $5 billion over the next five years producing films and TV shows in the U.K. and Europe.
The significant investment comes after the release of Deadpool & Wolverine on July 26, which has seemingly breathed new life into its previously struggling Marvel Cinematic Universe. The film has earned global receipts totaling $1 billion, only the second film in 2024 to do so -- after Disney's Inside Out 2.
Jan Koeppen, president of Disney across Europe, the Middle East, and Africa, believes the win with Deadpool proves that its Marvel franchise "seems to have a lot of life left." He added, "We feel like we're really on a roll again with movies, which is fantastic."
Disney has spent about $3.5 billion over the last five years on U.K. film production but will ramp that up to $1 billion annually in the U.K. and across Europe. The increased investment is exciting because the company has seemingly found its stride and continues to expand. Koeppen called Disney one of the fastest-growing media companies across his region of the world and believes it has a lot more growth ahead.
A massive win in streaming
Disney reported third-quarter earnings earlier this month. Revenue increased by 4% year over year and outperformed Wall Street forecasts by $70 million. Earnings per share (EPS) of $1.39 beat estimates by $0.20. Despite slowing growth in its theme parks, attributed to economic headwinds, the quarter was positive overall thanks to a massive win in streaming.
The crowning achievement of the period undoubtedly came from its direct-to-consumer division, with the Disney+ streaming service reaching profitability a quarter earlier than expected. Total operating income for the period soared 19% year over year, driven primarily by streaming, which delivered $47 million in operating profit, massively improving on the $512 million in losses it posted a year ago.
The win in streaming came alongside news of planned price hikes in mid-October, which will increase monthly subscription rates by $1 to $2. The move will likely further improve operating margins, increasing its revenue per subscriber.
Streaming can be a challenging industry to succeed in, as proved by the consistent hurdles rivals like Warner Bros. Discovery and Comcast have faced. As a result, Disney+ achieving profitability is promising for the company's future, diversifying its business and illustrating the potency of its brand.
Creating engaging content will be crucial to driving subscriptions on Disney+, making increased investment in Europe a positive move for the company's long-term future.
Trading at its best value in months
Disney has had a challenging few years. Its stock is down 38% since 2019, as the company had to contend with a global pandemic, a subsequent economic downturn, and a costly expansion in the new streaming business.
However, recent earnings suggest the company is finally turning a corner, and now could be an opportunity to buy its stock at a bargain.
Data by YCharts.
This chart shows Disney's forward price-to-earnings ratio (P/E) and price-to-sales ratio (P/S) are well below their five-year averages. On their own, these figures would make Disney's stock a bargain. However, comparing them to their five-year averages only strengthens the bullish argument for Disney's stock, with it trading at its best value in years.
Disney has made some game-changing moves that have put its business on an exciting growth trajectory. Alongside a bargain-bin share price, its stock is a no-brainer buy right now.
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Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney and Warner Bros. Discovery. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
