Like many other companies, it’s been a rough past 12 months for The Walt Disney Company (NYSE: DIS), which is down over 23% over that span, even after rallying more than 23% year to date (as of Jan. 30). As a blue chip stock, Disney has been a staple in many people’s portfolios, but the entertainment giant has lagged for the past five years, up less than 1% since February 2018.
However, I’m confident things will turn around. Here are three reasons to be bullish on Disney in 2023 and going forward.
1. The return of Bob Iger
After being CEO of Disney from 2005 to 2020, Robert (Bob) Iger retired in 2021 — only to return roughly a year later to replace Bob Chapek. When evaluating a company, an often underrated consideration is its management. That’s partly because “good” and “bad” management is much more relative than other quantitative metrics like profit or customer growth.
One thing that can’t be disputed is how well Disney performed under Iger’s leadership. Disney’s 2005 annual revenue was $31.9 billion, and by 2020, it had more than doubled to around $65.3 billion. That’s an impressive feat for a company that’s been around since 1923.
What may be the biggest reason investors should rejoice in Iger’s return is how well the company did creatively and with its storytelling under his first stint. Employees reportedly complained about creative restraint under Chapek that led to resentment, increased bureaucracy, and was beginning to take a toll on some leadership.
While CEO, Iger led the acquisitions of Pixar, Marvel, 21st Century Fox’s entertainment assets, and Lucasfilm. By no means is he solely responsible for their success, but he’s proven to have a vision and allow the creative geniuses do what they do best. Disney’s intellectual property is its bread and butter, and Iger will make sure they don’t lose sight of that.
2. Emphasis on streaming profits
Although it still lags behind streaming leader Netflix (NASDAQ: NFLX) in subscribers, Disney+ is a formidable player in the streaming game. Since its launch, Disney has emphasized growing its subscribers as fast as possible, spending billions on marketing and content, and sacrificing profitability along the way.
This is about to change, according to Iger, who told a town-hall meeting that “instead of chasing subscribers with aggressive marketing and aggressive spend on content, we have to start chasing profitability.” And that’s music to investors’ ears, considering Disney’s direct-to-consumer (streaming) division had an operating loss of $1.5 billion in its fourth quarter of fiscal 2022.
The company’s first step to profitability was increasing its streaming subscriptions’ price. Disney+ (with no ads) went from $7.99 to $10.99 monthly and $79.99 to $109.99 annually. Streaming will undoubtedly play a huge role in Disney’s long-term growth, so a switch to prioritizing making it profitable could really add to its bottom line.
3. Parks are picking up momentum again
After closures caused by the COVID-19 pandemic, Disney parks are back and picking up steam. Since being shut down for most of 2020 and limited in 2021, it seems bottled-up demand to visit “The Happiest Place On Earth” and other attractions has paid off in 2022, with Disney’s Parks, Experiences and Products segment growing revenue by 73% year over year.
With 2023 being Disney’s 100th year, there’s strong reason to believe park attendance and revenue will give a strong push this year, especially with Disney holding special events that are sure to draw more crowds.
It’s clear Disney is trying to improve the park experience, including bringing back free parking for hotel guests (which it took away years ago), extended hours for annual pass holders without reservations, and additional perks for those with Genie+, the paid subscription for park guests that allows for skipping lines and such. These small but important steps should draw back fans who have complained about skyrocketing prices at the parks.
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.