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Disney DIS currently trades at a compelling valuation, with a P/E ratio of 18.41x, which is below its five-year historical average of 20.79x and the Zacks Media Conglomerates industry average of 20.1x. This discounted multiple presents an intriguing opportunity for investors, yet several strategic considerations suggest maintaining a hold position while awaiting clearer catalysts in 2025.
The entertainment conglomerate demonstrated resilient performance in its third-quarter fiscal 2025 results, with total segment operating income increasing 8% to $4.6 billion and adjusted earnings per share rising 16% to $1.61.
Management's confidence in the trajectory prompted an upward revision to fiscal 2025 guidance, now targeting adjusted earnings per share of $5.85, representing 18% growth from fiscal 2024. This improved outlook reflects the successful execution of streaming profitability initiatives and robust theme park performance; however, investors should consider the timing of their entry carefully.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $94.91 billion, indicating 3.88% year-over-year growth, with earnings expected to increase 17.91% to $5.86 per share. These projections suggest steady growth ahead.
The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote
Disney's direct-to-consumer segment achieved a pivotal milestone, swinging to operating income of $346 million in the third quarter of fiscal 2025 against a loss in the prior-year period. The streaming business added 1.8 million Disney+ subscribers during the quarter, reaching 128 million total subscribers, demonstrating sustainable growth despite intense competition from Netflix, which commands substantially higher valuations at current levels.
Looking ahead, management expects Disney+ and Hulu subscriptions to increase by more than 10 million in the fiscal fourth quarter, primarily driven by the expanded Charter Communications distribution deal. The company raised its direct-to-consumer operating income guidance to $1.3 billion for fiscal 2025, marking a significant turnaround from substantial losses just two years ago. The forthcoming integration of Hulu into Disney+ creates additional synergies and positions the platform competitively against streaming rivals.
The sports segment represents a critical growth catalyst with several transformative initiatives underway. ESPN's new direct-to-consumer streaming service launched on Aug. 21, 2025, priced at $29.99 monthly, marking a pivotal shift in sports media distribution. The platform secured exclusive WWE wrestling events and strengthened its position through a landmark deal where the NFL acquired a 10% stake in ESPN, bringing NFL Network and RedZone content to the platform while enhancing distribution capabilities.
Management anticipates the ESPN streaming service will be accretive to earnings in its first year, with potential benefits including reduced churn rates and enhanced advertising value. The sports segment's operating income guidance improved to 18% year-over-year growth for fiscal 2025, up from previous 13% growth expectations, reflecting strong momentum in advertising revenues and strategic content investments.
Disney's experiences segment delivered 8% revenue growth to $9.1 billion in the fiscal third quarter, with domestic parks operating income rising 22% to $1.7 billion. Guest spending increased at domestic theme parks while Disney Cruise Line benefited from fleet expansion, including the Disney Treasure launch. The company maintains unprecedented expansion plans globally, positioning for sustained growth beyond current fiscal periods.
Major developments include the Tropical Americas land at Animal Kingdom featuring Encanto and Indiana Jones attractions opening in 2027, alongside Avengers Campus doubling in size at Disney California Adventure with construction beginning in 2026. Additional projects encompass the reimagined Test Track at EPCOT reopening in 2025 and international expansions, including new Frozen and Lion King lands at Disneyland Paris. These investments demonstrate commitment to long-term growth while potentially pressuring near-term margins.
Disney's year-to-date performance in 2025 reflects modest gains of approximately 6.7%, trailing significantly behind the Zacks Consumer Discretionary sector. In comparison, shares of Disney’s competitors, including Warner Bros. Discovery WBD, Amazon AMZN and Netflix NFLX have returned 16.8%, 7.5% and 39.7%, respectively.
Netflix maintains commanding leadership as the streaming giant's pure-play model continues attracting premium valuations. Amazon Prime Video's parent Amazon demonstrates strong performance, bolstered by Prime Video's expanding advertising revenues reaching $12.8 billion quarterly. Disney's valuation discount relative to Netflix appears justified, given its operational margins, yet Disney offers diversification advantages over Netflix's singular streaming focus. Warner Bros. Discovery continues facing debt burdens and linear television headwinds, which contrast with Disney's improving fundamentals. Amazon Prime Video benefits from Amazon's ecosystem integration, providing competitive advantages in content investment capacity that pressure both Disney and standalone players. While Netflix commands investor confidence through consistent execution, Disney's multiple revenue streams position favorably against Warner Bros. Discovery's restructuring challenges and Amazon Prime Video's subsidized model within Amazon's broader e-commerce dominance.
Despite trading at historically discounted valuations and demonstrating operational improvements across streaming and parks segments, investors should maintain a hold position on Disney stock. The combination of macroeconomic uncertainty, ongoing theme park construction disruptions through 2026, and competitive streaming market dynamics suggests patience may reward those awaiting better entry points. The company's strong fundamentals support eventual appreciation, but near-term catalysts appear limited despite ongoing significant capital investments. Investors should monitor fiscal fourth-quarter results for streaming subscriber trajectory validation and assess theme park attendance trends amid expansion-related disruptions before increasing positions. Disney currently carries a Zacks Rank #3 (Hold). 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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