Shares of Disney fell Wednesday as concerns about attendance at its theme parks overshadowed streaming profits and better-than-expected headline results. However, the quarter checked the boxes that matter most to us, making the stock decline a buying opportunity. Revenue in the fiscal third quarter totaled $23.16 billion, topping the $23.07 billion expected by analysts, according to estimates compiled by LSEG. On an annual basis, revenue rose 3.7%. Adjusted earnings per share (EPS) rose 35% year over year to $1.39, solidly ahead of the $1.19 estimate, LSEG data showed. Disney Why we own it: We value Disney for its best-in-class theme-park business, which has immense pricing power. We also believe there’s more upside as management cuts costs, expands profit margins through its direct-to-consumer (DTC) products and finds new ways to monetize ESPN. Competitors: Comcast, Netflix, Warner Bros Discovery and Paramount Global Last buy: July 29, 2024 Initiation: Sept. 21, 2021 Bottom line Disney’s streaming results give us the confidence to view Wednesday’s stock decline as one worth buying. The combined streaming business — encompassing Disney+, Hulu and ESPN+ — turned in its first-ever quarterly profit slightly ahead of schedule. And executives expect the business to make more money in the quarters ahead on its way to achieving its previously stated goal of double-digit operating margins. The subscription price hikes announced Tuesday will help, as will the full-scale crackdown on password sharing set to begin next month. “Streaming had been a black hole,” Jim Cramer said Wednesday. “Suddenly, streaming has come bouncing back. And that’s really what matters. I think Disney is a point-blank buy here,” he added, though Club restrictions prohibit us from trading the stock for at least the next 72 hours because Jim discussed the company on CNBC TV Wednesday morning. A big concern among the sellers is Disney’s theme park unit, which missed revenue expectations in the quarter due to a moderation in demand that management expects to last a few quarters. This led to flattish revenue growth for its experiences segment. It’s certainly not ideal to see the company’s profit engine start to misfire, but we’re not alarmed for a few reasons. CFO Hugh Johnston indicated on the company’s May earnings call that park demand was normalizing from its post-pandemic boom, which investors understandably didn’t love at the time. Then, about two weeks ago, CNBC parent Comcast issued weak April-to-June results for its Universal theme parks business, which weighed on Disney’s stock in that session . Now also layer in big picture worries about the health of the U.S. economy and consumer spending, which have grown more pronounced in recent weeks. That murky backdrop for the parks unit is part of the reason Disney closed Tuesday’s session just under $90 a share. It would be a different story if Disney offered these results and measured outlook on the parks business with the…
Read More: Disney falls on concerns about its theme parks. Why we’d buy the stock