Parks & Streaming Drive Disney's Q3 Results: Time to Buy the Stock?

Disney DIS has delivered a compelling investment thesis for 2025, with its third-quarter fiscal 2025 results showcasing the powerful synergy between its theme parks business and rapidly improving streaming operations. Disney reported adjusted earnings per share of $1.61, significantly beating the consensus mark by 10.3%, while raising its full-year guidance to $5.85 per share, representing an impressive 18% increase from fiscal 2024.

Disney's Experiences segment generated more than $9 billion in revenues, representing an 8% year-over-year increase. The standout performer was Walt Disney World, which achieved an all-time high for fiscal third-quarter revenues, driven by strong demand and longer guest stays, with bookings up 4% compared to the prior year.

Domestic Parks operating income surged 22% to $1.65 billion, fueled by higher per-capita guest spending and expanded cruise operations. This demonstrates Disney's pricing power and the resilience of consumer demand for premium entertainment experiences, even amid broader economic uncertainties.

Looking ahead, Disney expects segment operating income growth of approximately 8% for fiscal 2025, while management noted that bookings for the Experiences segment are tracking about 6% higher so far in the current quarter. The company is also pursuing unprecedented global expansion, with more expansions underway around the world in parks and experiences than at any other time in Disney's history, including a newly announced theme park resort in Abu Dhabi.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $94.93 billion, indicating 3.91% year-over-year growth, with earnings expected to increase 17.3% to $5.83 per share. These projections suggest steady growth ahead.

The Walt Disney Company Price and Consensus

The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote

Streaming Business Achieves Profitability Milestone

Disney's direct-to-consumer streaming segment has reached a critical inflection point. The streaming business posted $346 million in operating income for the fiscal third quarter, a dramatic turnaround from losses in the prior year. This transformation is particularly significant given that just two years ago, Disney was losing a billion dollars quarterly on streaming operations.

Disney+ core subscribers reached 128 million, adding 1.8 million in the quarter, while combined Disney+ and Hulu subscriptions totaled 183 million. More importantly, Disney raised its operating income expectation for direct-to-consumer streaming to $1.3 billion for fiscal 2025, indicating sustainable profitability growth.

Disney's competitive advantage lies in its ability to create content that generates value across multiple business segments. The success of the live-action Lilo & Stitch film exemplifies this strategy perfectly. The film crossed the $1 billion mark at the worldwide box office, becoming Hollywood's first film to reach that milestone in 2025, while fueling more than 640 million hours of related content streaming globally on Disney+.

Disney plans to fully integrate Hulu into Disney+, creating an impressive package of entertainment that pairs the highest-caliber brands and franchises, general entertainment, family programming, news, and industry-leading sports content in a single app. This integration will enhance customer value while reducing operational complexity.

The launch of ESPN's direct-to-consumer service represents another significant growth catalyst. ESPN Unlimited launches Aug. 21 for $30 per month, with Disney expecting the new streaming service to be accretive to overall earnings growth. ESPN's expanded NFL partnership, including a 10% NFL stake in the company and enhanced content rights, strengthens Disney's position in the lucrative sports streaming market.

Compelling Valuation in Competitive Streaming Landscape

The streaming market's continued expansion, with traditional cable penetration falling below 50% of U.S. households, positions Disney's integrated content strategy advantageously for sustained growth. Shares of Disney have returned 1.5% in the year-to-date period compared with the Zacks Consumer Discretionary sector’s growth of 12%. In comparison, shares of Disney’s competitors, including Apple AAPL, has lost 12% year to date, while shares of Amazon AMZN and Netflix NFLX have returned 1.8% and 33%, respectively.

DIS’s Year-to-Date Performance

Disney stock presents exceptional value compared to streaming competitors, particularly Netflix. Disney trades at a forward P/E of approximately 18x despite achieving streaming profitability and executing massive expansion plans, notably below the Zacks Media Conglomerates industry average of 20.11x. Disney's forward price-to-sales ratio stands at just one-fifth of Netflix's, offering significantly better upside potential. While Netflix dominates pure streaming metrics, Disney's diversified entertainment ecosystem provides multiple revenue streams that pure-play streaming companies lack. Disney's direct-to-consumer operations generated approximately $24.15 billion in revenues over the last 12 months compared with Netflix's $41 billion, yet Disney's market capitalization remains substantially lower.

DIS’ P/E F12M Ratio Depicts Discounted Valuation

Investment Outlook

Disney's third-quarter results demonstrate the company's successful navigation of industry transformation while maintaining operational excellence. The combination of record-breaking theme park performance, streaming profitability, and strategic content integration creates a compelling investment opportunity for 2025.

With Disney raising its fiscal 2025 guidance to $5.85 per share, representing an 18% increase from the previous year, the company appears well-positioned to deliver sustained growth. The convergence of multiple growth drivers —expanding global theme park footprint, profitable streaming operations, and enhanced sports content offerings —suggests Disney stock merits serious consideration for growth-oriented portfolios in 2025. Disney currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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