The Disney share price is up 31% this year! Here’s why I think it could go even higher

Jon Smith explains why the Disney share price is doing well, with the turnaround strategy likely to help the stock further in years to come.

| More on:
Young Caucasian woman with pink her studying from her laptop screen

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Walt Disney Co (NYSE:DIS) has been in the news a lot this week. From activist investor pushes to even Elon Musk’s tweets, the Disney share price has been volatile. Yet when I take a step back and think about what all this noise means for the long-term direction for the company, I’m actually thinking about buying the stock. Here’s why.

Recent volatility

Nelson Peltz, a famous activist investor, has a stake in Disney. He has been pushing for his fund to get two seats on Disney’s board of directors. This would have allowed him to push for more aggressive changes to the business. He feels this is needed in order to help the business grow.

One of the world’s richest men, Musk tweeted he’d invest in Disney if Peltz was appointed. I do have to take this with a pinch of salt, as Disney stopped advertising on his social media platform X. Musk has clashed with the current CEO, Bob Iger, so his claim to invest if Peltz had a seat at the table seems a bit of a personal vendetta.

Last night (3 April), the shareholders voted against his push to give him the seats. Rather, they favoured the turnaround plan of Bob Iger. This was laid out about a year ago, involving large scale cost-cutting in order to make the business more efficient and profitable.

Throughout the past couple of weeks, the share price has been very choppy, as investors tried to understand the impact of the vote outcome. I see Peltz as a key risk going forward, as I doubt that he’ll simply roll over. His plans are more radical than the current turnaround strategy, but I feel they go too far and would be a negative for the stock in the long run.

The plan’s working

The strategy to get Disney back to where it was years ago is starting to pay off.

For example, the cost-cutting is really ramping up. In the latest quarterly earnings report, it stated that $500m was saved during the period. Further, management said: “We are on track to meet or exceed our $7.5bn annualized savings target by the end of fiscal 2024”.

This is a large positive, as the shedding of such expenses highlights there was a large amount of unnecessary spending going on.

The other side of the coin is growth. Income before tax for the quarter was $2.87bn, up 62% from the same quarter the year before. I think the company can continue to push further here. When I add up higher income and lower expenses, it’s a natural recipe for a higher share price.

The share price is up 18% over the past year. But at $119, it’s still a long way back from levels above $175 it traded at in 2021. Therefore, I think there’s plenty of scope for this to continue to rally. I’m thinking about adding this to my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Growth Shares

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

2 shares I’d buy to try and double my money in 10 years

Stephen Wright thinks there are still opportunities to to buy UK shares that can double in value over the next…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

NIO stock has crashed! Here’s why I still wouldn’t touch it with a bargepole

I've been watching NIO stock falling heavily, and wondering when might be a good time to get in cheaply. Here's…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

£7,000 to invest? 2 soaring FTSE 100 shares to consider investing in today

The FTSE 100 is packed with excellent momentum shares at the present. Royston Wild walks us through two he'd buy…

Read more »

Investing Articles

The Marks and Spencer share price dips! Is this my chance to buy?

Marks and Spencer was one of the hottest stocks on the market last year. With its share price falling in…

Read more »

Growth Shares

How low could the boohoo share price go?

Jon Smith explains why the enterprise value and the low risk of bankruptcy should help to prevent the boohoo share…

Read more »

Investing Articles

I’m waiting for the Rolls-Royce share price to pull back before I buy

The Rolls-Royce share price has been the Footsie's best performer in the last year. But this Fool has no intention…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Here’s 1 FTSE share with massive growth potential!

Our writer’s found a FTSE share that he thinks has a bright future. But it’s been an eventful few months…

Read more »

Investing Articles

Here’s why I’m not enticed by the tanking NIO share price

The NIO share price continues sinking as the brand that promised so much keeps failing to deliver. Dr James Fox…

Read more »