Disney Stock Jumps on Earnings—Is the Magic Sustainable?

Key Points

• Disney stock is up more than 10% after a strong earnings report in which it showed significant growth in theme parks and Disney+ subscribers.
• Disney's partnership with Miral Group to open a theme park in Abu Dhabi marks a strategic expansion into the Middle East.
• Disney raised its full-year earnings per share forecast to $5.75 and increased its operating cash flow guidance to $17 billion.

The Walt Disney Company NYSE: DIS gave the market a jump start by delivering a beat and raise earnings report before the market opened on May 7.

The company pointed to strength at its iconic theme parks as well as a jump of over one-million subscribers to its Disney+ streaming service.

DIS stock shot up more than 10% as investors cheered that, for one quarter at least, Disney’s magic had returned. But is this a Disney-only story, or will it extend to other consumer discretionary stocks? And will it last?

The company did say it was monitoring macroeconomic conditions closely for potential impacts on its business. 

Chief executive officer (CEO) Bob Iger also noted that “uncertainty remains regarding the operating environment for the balance of the fiscal year.”

But, for now, the story is growth.

• Revenue for the quarter was $23.6 billion, which was 7% higher year-over-year (YOY) and beat analysts’ forecasts of $23.1 billion.

• Earnings per share (EPS) came in at $1.45, which was 19% higher both year over year and compared to analysts’ forecasts.

• Theme park revenue was $8.9 billion, which was higher than the $8.4 billion recorded in the same quarter last year and significantly higher than the $7.98 billion it raised last year.

• Even the company’s linear cable business showed a 2% increase in operating income, even as revenue declined by 13%.

A New Park in the Middle East Shows a New Business Model

Disney is partnering with regional developer Miral Group to open a new theme park in Abu Dhabi. This will be the company’s first theme park in the Middle East and its first major new theme park in over a decade.

The partnership is win-win for the country and the company. Disney has been looking at the Middle East for some time as it looks to export Disney stories to the region’s younger audience. In 2024, Abu Dhabi announced plans to invest over $10 billion to grow its tourism business.

What’s noteworthy about the partnership is how it will work. Miral is responsible for financing, building, and operating the resort. However, Disney Imagineers will provide creative and technical support and operational oversight. According to a regulatory filing, Disney will earn royalties based on the park’s revenue.

Disney+ Adds Over 1 Million Subscribers; Is the Worst Over?

In what may be the most pleasant surprise for investors, Disney reported over $1.4 million in new subscribers to its Disney+ streaming service. That was higher than analysts' estimates and also higher than the company’s internal forecast, which forecasted a slight decline.

The surge in new subscribers to Disney+ is significant as it marks a pivotal recovery for Disney’s streaming business. Since his return as CEO, Iger has cut more than $5 billion in services and content from the company's streaming business. This growth reinforces Disney’s competitive stance in the saturated streaming market, signals effective content strategies, and boosts investor confidence. It also helps offset declines in the company's traditional media segments, showcasing Disney’s successful pivot to digital.

Disney Raised Its Full-Year Guidance

Many companies are refraining from issuing full-year guidance due to uncertainty around tariff policy. That’s why it was encouraging to see Disney not only offer guidance but significantly raise its earnings target for the full year.

Specifically, Disney is forecasting full-year earnings per share of $5.75, which is 5.6% higher than the $5.44 projected by analysts. The company also raised its operating cash flow guidance to $17 billion from $15 billion. It confirmed that it had bought back $1 billion in shares for the quarter. Disney had previously announced its intention to buy back $3 billion in shares, so perhaps they are on pace to raise that number.

Is DIS Stock a Buy?

As recently as mid-April, the Relative Strength Indicator (RSI) showed Disney stock as being oversold. The stock was rallying ahead of earnings, and this strong report has pushed the stock above its 50-day simple moving average. It also puts the stock right back at a level that formed resistance in late March.

The post-earnings surge has pushed the stock’s RSI to an overbought level. But if analyst sentiment becomes more bullish, it’s possible that the stock could retest the March 2025 highs around $113.