In a surprising twist for the Magic Kingdom, The Walt Disney Company (NYSE:DIS) saw its stock decline despite surpassing earnings expectations. As Disney continues to enchant millions through its Entertainment, Sports, and Experiences segments, there’s more to the story than meets the eye.
Mar Vista Investment Partners, LLC, in their Q2 2024 investor letter, highlighted Disney’s performance. Their “Mar Vista Focus strategy” returned +3.74%, which came up short against The Russell 1000 Growth Index and the S&P 500 Index. The firm’s stock selection in information technology, communication services, and consumer discretionary sectors weighed on its overall results. However, they remain optimistic due to decreasing inflation and high enterprise spending.
Delving into the specifics, Disney’s shares took a hit post-earnings despite exceeding financial forecasts. The noteworthy milestone was Disney+ and Hulu turning a quarterly profit for the first time. However, concerns about theme park attendance reverting to pre-pandemic levels played a significant role in the decline. The theme parks and experiences, vital for approximately 60% of Disney’s earnings, faced a noticeable deceleration after a period of booming growth. Despite this, Disney’s stock is deemed to be undervalued, with expectations that the streaming division’s profitability will continue to grow and close the valuation gap.
Interestingly, as of the second quarter, Disney remained a popular choice among hedge funds, holding the 31st position in “Most Popular Stocks Among Hedge Funds.” Ninety-two hedge fund portfolios featured Disney, unchanged from the previous quarter. Nevertheless, Mar Vista’s analysis suggests that while Disney retains its allure, AI stocks might offer more promising returns, likening this opportunity to early investments in giants like NVIDIA.
What do you think about Disney’s future? Share your thoughts in the comments and let’s get the conversation started. And don’t forget to share this story with fellow Disney fans!
Source: Soumya Eswaran
