Mickey Mouse's job is probably safe, but spare a thought for the thousands of Walt Disney employees on the wrong end of layoffs this year. At least investors have been doing well heading into Tuesday's fourth-quarter earnings report.
As harsh as it appears, slashing jobs has helped power the entertainment and theme park company's stock 29% higher since late March, to trade at just under $120 as of Thursday. Shares of Disney's rival Netflix are flat over the same period.
Pleasing investors has been a top priority for CEO Josh D'Amaro, who succeeded Bob Iger in March. He joined Disney nearly three decades ago and headed up Disney's experiences division from 2020 to 2026. He has hit the ground running thanks to the cost cuts, his grand plans for streaming, and a rock-solid parks business delivering about 60% of the company's profit.
Shares suffered a Tower of Terror-style plunge from February 2021 to December 2022, shedding half of their value due to concerns about Disney's TV networks, including sports channel ESPN. But former parks exec D'Amaro's strong start as CEO means the stock may finally be ready to rally. Should investors consider buying in?
Here's how he has done it.
Let's start with the layoffs. (The exact numbers aren't clear but are expected to be in the thousands.) D'Amaro has swung the ax at divisions including Pixar and ESPN since taking charge as he bids to streamline the sprawling company. Slashing expenses won't win him any internal popularity contests, but it's just what investors wanted.
"The stock has traded in a range for a really long time," Seaport Research Partners analyst David Joyce tells Barron's. Shares have been trapped at $79 to $120 since April 2022. "The market gave D'Amaro a couple of quarters to get comfortable, but now we've seen layoffs and head-count reductions, Disney is putting the profitability narrative into place."
The stock's recent rally isn't just about cost cuts. Price hikes and ad-supported plans have at last helped make Disney+ profitable, after years when the streaming platform lagged behind Netflix. Analysts polled by FactSet expect profit for Disney's entertainment division to grow by 21%, to $6.6 billion, over the next two years, with streaming more than offsetting declines in its linear TV businesses like ABC and ESPN.
D'Amaro, meanwhile, has big plans for streaming. He promised to go all-in on technology in a 3,000-word letter to shareholders back in May, laying out a plan to make Disney+ a one-stop shop where users can interact with all of the company's different businesses. The CEO wants to make the streaming service "more engaging, more personalized, and more central to how fans experience our brands." The vision is for users to be able to move seamlessly from old Disney movies to live sports broadcasts to park promotions, without ever leaving the platform.
Big swings are possible because Disney's experiences division, which covers parks and cruises, remains a reliable moneymaker. Even the Iran war hasn't dented demand -- analysts estimate that operating income for the division rose 11%, to $11.1 billion, over the fiscal year ended in September.
Barron's drew up a to-do list for Disney back in January, and we'd give D'Amaro an A- if we were grading his time in charge so far. The new CEO has signaled that he'll accelerate streaming growth and build on parks' strong track record -- but ESPN remains a worry. D'Amaro mentioned the sports cable channel 15 times in the letter to investors, without laying out a clear plan for how to offset cable losses.
But the good news is that Disney's legacy TV networks are no longer a Dumbo-size problem, largely because their profit has taken a beating over the past decade -- and the market has given up trying to price them in. From 2022 to 2025, operating income for the TV division dropped to $2.96 billion from $8.52 billion.
"That should no longer be a reason for Disney to get punished," says Morningstar analyst Matt Dolgin. "It doesn't even matter anymore....This company shouldn't be trading on that at all."
He says a sum-of-the-parts model could value Disney at $155 a share, with the parks and cruises business worth $175 billion by itself. The company's total market cap stood at $207 billion as of Wednesday.
D'Amaro has already convinced investors that he has the magic touch. If the looming report tops the Street's expectations, shares will get the pixie dust they need to extend their strong recent run.
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