Disney Is Still an Awful Stock

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24/7 Wall St. Insights

• Walt Disney Co. ( NYSE: DIS ) trumpeted a turnaround as its streaming unit made money for the first time.
• But the entertainment giant also showed it cannot fire on all cylinders.
• Also: Dividend legends to hold forever .

Walt Disney Co. ( NYSE: DIS ) trumpeted a turnaround as its streaming unit made money for the first time. However, another part of the company–its parks unit–warned that business had slowed. The problem may be part of a large one. Consumer spending has started to decline in the United States. The trend, separately, has also caused worry about a recession. Disney proved it cannot fire on all cylinders.

The market saw the problem with Disney’s earnings picture. After the announcement, the stock dropped about 4.5%. The stock is down 19% in the past two years, while the S&P 500 has risen 25% in the same period. If raider Nelson Peltz had not taken a position and pressed for a Disney board seat and changes at the company, Disney's stock price could be worse.

Disney’s quarterly revenue increased 4% to $23.2 billion. The company posted net income of $2.6 billion, compared to a year-ago loss of $460 million. While streaming figures improved, the operating profit was tiny. Revenue for the Direct to Consumer unit rose 15% to $6.4 billion, Operating income was $47 million, compared to a loss of $512 million last year.

Disney’s streaming challenge remains that there are too many streaming services, and Netflix and Amazon dominate the sector. Virtually every other large media company, from Warner Bros. Discovery to Paramount, has a streaming business. Apple does as well with its Apple+ service. Apple has an almost infinite amount of money to support its product, which separates it from the rest of the industry. It also has a target market of almost 2 billion people who own Apple hardware, particularly iPhones.

Disney said it has a theme park challenge. It also cannot say it has a bright future in streaming.

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