Disney shares staged one of their strongest single-day rallies this millennium Thursday on the back of the company’s blowout earnings report, though the entertainment titan still has a ways to go to recapture its former glory on the stock market.
Disney CEO Bob Iger appears at Disney’s Shanghai resort in December.
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Key Facts
Disney’s stock ballooned almost 13% to just shy of $112 by mid-afternoon, hitting its highest intraday level since Feb. 9, 2023.
Should the gains hold, Thursday will be Disney stock’s best day since December 2020 and its fifth-best day since 2000, according to FactSet data.
The dramatic rise for Disney came a day after the company delivered strong quarterly results and projected $4.60 earnings per share for its fiscal year ending in September, which would make 2024 its most profitable fiscal year since 2019.
Bank of America was among several Wall Street firms to dramatically bump its price target for Disney, upping its target from $110 to $130, with analysts led by Jessica Reif Ehrlich remarking they were “incredibly encouraged” by Disney’s bottom line progress under the tutelage of CEO Bob Iger, whose initiatives “are already having an impact” 15 months into his second tenure at the helm of Disney.
Contra
Even after Thursday’s recovery, Disney remains a badly battered stock. Shares are down 44% from their 2021 peak, needing a nearly 100% further gain to hit a new all-time high, and Disney has underperformed the S&P 500 on a two-year, three-year, five-year, 10-year, 15-year and 20-year basis. Even if Disney meets its own forecast of a $4.60 profit per share this year, that’s still about 36% short of its record profit achieved in 2018, and analysts don’t project Disney to return to its 2018 profitability until 2028, according to FactSet.
Crucial Quote
“We cannot help but wonder what would have happened without an activist present,” remarked Daiwa analyst Jonathan Kees, tipping his hat toward the so-far unsuccessful activist investor campaign helmed by billionaire Nelson Peltz aimed at installing margin-hungry board members and curbing Iger’s power.
Key Background
A combination of missteps and poor timing led to Disney’s financial headaches. The sudden halt in its parks business during the early days of the Covid-19 pandemic caused steep losses in its typically highly profitable unit, growth stagnated in its linear television business including ESPN amid the secular decline in cable television and losses mounted in its Disney+ direct-to-consumer division, which has lost a whopping $8.5 billion over the last three years. And Disney’s issues over recent years have also been political, notably drawing the ire of powerful right-leaning figures like Florida Gov. Ron DeSantis and the world’s wealthiest man Elon Musk over its diversity policies. Disney famously lost some of its special tax privileges in Florida last year after DeSantis went after the company for its pro-LGBTQ stance while Musk attacked Disney’s “DEI Gestapo” for being “racist” against white people this week.
This article was first published on forbes.com and all figures are in USD.
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