Disney(NYSE: DIS) investors were wishing for a better performance early Tuesday. The entertainment giant's stock trailed the market by a wide margin, falling 10% through early morning trading compared to a modest increase in the S&P 500. That decline wasn't enough to erase all its 2024 gains, though, as the stock remains higher by 16% year to date.
Tuesday's drop was sparked by Disney's fiscal Q2 update that wasn't well received on Wall Street.
Good news
The big-picture results were solid. Disney reported modestly higher sales as revenue ticked up to $22.1 billion from $21.8 billion a year ago. That's a bit below the $22.14 billion that most Wall Street analysts were expecting from the business. Yet, Disney still managed to offset its shrinking TV broadcasting unit with strong growth at its theme parks division and across its digital entertainment empire.
The direct-to-consumer sales through Disney+ and Hulu were strong as well, with subscriber gains meeting price increases to move the streaming segment toward profitability. "It's clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results," CEO Robert Iger said in a press release.
Disney's finances were especially strong, with cash flow more than doubling to $5.9 billion over the past six months. Operating income in that time is up a healthy 22% to $7.7 billion.
Looking ahead
Disney raised its short-term earnings outlook following that strong financial result. The company also affirmed its expectations to move the streaming business into profitability for the fiscal year 2025. Yet, investors seemed more concerned with potential short-term challenges ahead, including a seasonally weak Q3 period for the streaming business and a slower pace for new movie title releases.
Disney's business looks solid, though, especially as streaming moves toward the positive column on earnings. Investors should consider the stock price decline a good opportunity to pick up shares of the rebounding entertainment giant at a discount.
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Demitri Kalogeropoulos has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
