The past four years have been quite a rollercoaster for Walt Disney (NYSE: DIS). They've been pouring money into going digital, which has cost them a pretty penny. Their profits have taken a nosedive from $5.4 billion before the pandemic to a measly $264 million per quarter. No wonder their stock is down by 52% from its peak.
But here's the thing: Disney isn't struggling because people aren't interested. Their main businesses, like theme parks and streaming, are actually growing. The real issue is they're not getting enough bang for their buck with all the money they're spending.
They're working on fixing this, though. Let's break it down.
First off, there's still a strong demand for Disney. Sure, they've been losing money, but if they start making more, their stock could bounce back up. The biggest drain on their finances has been their streaming services like Disney+ and Hulu.
But Disney+ is doing pretty well. In the last quarter, they gained 7 million new subscribers, bringing in $5 billion in revenue for their streaming segment. Plus, they managed to cut their losses by $1 billion, putting them on track to turn a profit by next September.
And get this: people are willing to pay even more for Disney+. Despite being a tad cheaper than Netflix, customers are still signing up. Half of their new subscribers are going for the more expensive ad-free option, even though it costs a dollar more than Netflix's ad-supported plan.
Disney's got some killer content, too. Their movies are smashing it at the box office, and their theme parks are raking in more cash than ever. So yeah, buying Disney stock for less than $100 seems like a pretty smart move.
But there are still some roadblocks ahead. Their TV networks, like ABC and ESPN, haven't been doing so hot. Advertising revenue dropped by 9% last quarter, dragging down the company's overall growth.
And then there's the debt. Disney borrowed a ton of cash to buy Fox's stuff a while back, and now they owe $46 billion. Not a great look when your profits are tanking.
Sure, they made around $10 billion in cash last year and have $17 billion lying around, but that debt is still looming over them. When you add up their debt and their market value, the stock is trading at a pretty high price compared to what they were making before the pandemic.
So, while Disney might bounce back eventually, it's gonna take some time. They need to chip away at that debt, cut down on interest payments, and make their streaming business more profitable. If you're patient, though, Disney's stock should start climbing again.
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