To The Moon

While some investors might view $Walt Disney(DIS)$  ’s recent earnings report as a sign of a resurgent company, I remain unconvinced. Beneath the surface of "streaming profitability" lies a narrative of a company struggling to adapt to a changing entertainment industry.

Let's face it, Disney+ isn't for everyone. The content library, heavily tilted towards Marvel and Star Wars franchises, caters to a specific audience. Subscriber growth of a mere 6% reflects this limitation. This is particularly concerning when you consider that many Disney+ subscribers likely also subscribe to Netflix, further diminishing their long-term growth potential. To truly thrive in the competitive streaming wars, Disney needs a broader content library that caters to a wider range of demographics and interests.

The continued decline of Disney's linear TV business is a major cause for alarm. A 10% drop in revenue and a 13% decline in profits from this segment paint a picture of a business model struggling in the age of cord-cutting. This weakness significantly drags down Disney's overall performance. While Disney leadership seems resigned to the decline of linear TV, they haven't presented a convincing plan to offset the lost revenue and profitability from this once-reliable source of income.

Disney's stock price seems to be betting on a future of substantial growth. However, the current trajectory suggests otherwise. Given the headwinds facing their traditional business and the limited appeal of their streaming platform, achieving this level of growth seems like a fantasy. The current valuation feels completely disconnected from the reality of Disney's core businesses.

The lone bright spot in this report is the Parks and Experiences segment, which saw a 10% revenue increase. However, this segment only represents a third of Disney's total business. While their recent box office slump might be temporary, the decline in content sales and licensing revenue is another troubling sign. This segment, traditionally a major revenue driver, seems to be losing steam.

Disney leadership seems content to accept the decline of linear TV without a clear plan to compensate for the lost revenue. Furthermore, they haven't addressed the decreasing revenue and profitability from content sales, licensing, and sports. These areas require immediate attention, especially considering the current, optimistic stock valuation. Without a clear strategy to address these challenges and ensure sustainable growth across all business segments, Disney's future looks less like a happily ever after and more like a cautionary tale. Personally, I will not invest in Disney.

DIS Daily Chart

In conclusion, Disney's recent earnings report raises more questions than answers. Their streaming service, while profitable, lacks the broad appeal needed for explosive growth. The ongoing decline of their traditional business is a major weight on their overall performance. The current valuation seems overly optimistic in light of these challenges. Until Disney addresses these issues and presents a clearer path to sustainable growth across all its businesses, I'm staying away from DIS stock. The magic seems to be fading, and investors might be better off looking elsewhere for their happily ever after.

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Disclaimer: This post reflects my personal opinions and should not be considered as financial advice. Always conduct thorough research before making any investment decisions.