Walt Disney (DIS -0.04%) is finally in a good place. The stock hit another 52-week high on Tuesday. Disney's 25% gain in 2024 has nearly quadrupled the market's year-to-date gain. Momentum is finally on its side, but Disney shares would still need to shoot another 80% higher to take out the all-time highs it scored three years ago.
March may be a quiet month for the House of Mouse, but there's a big date approaching shortly after the page gets ripped from the calendar. Disney will host its annual shareholder meeting on April 3. With the media giant squaring off for a proxy battle with two different activist groups, it's a pretty big date for a company with an already colorful history.
Is Disney stock a buy now ahead of its shareholder meeting? Are you better off waiting until after the proxy battle concludes for greater clarity on Disney's future? Should you avoid Disney as an investment completely? Let's size up the opportunity of owning the iconic family entertainment bellwether before April 3.
Proxy music
With the shares rolling one would think that Disney can't lose board seats next month. It's not just about the upticks. Disney put out a blowout fiscal first quarter when it needed it the most last month, the final financial update before the annual meeting voting deadline.
However, something interesting is happening right now. Disney is putting on a full-court press to court press and shareholder support ahead of the shareholder vote. It has been pushing its Vote Disney website with a breakdown of its counterargument to activist complaints, pushing its cost cuts and growth initiatives.
Disney somehow even got Abigail Disney -- Roy Disney's granddaughter and vocal critic of many policies at the company that bears her name in recent years -- to voice her support for CEO Bob Iger and the current board. It's odd but glorious.
Disney even somehow outbid rival services for the exclusive streaming rights to Taylor Swift: The Eras Tour. Do you think it's a coincidence that Swift's record-breaking concert film will be on Disney+ three weeks before the annual shareholder meeting? Players gonna play, play, play, play, play.
Image source: Disney.
Haters gonna hate, hate, hate, hate, hate
If you're wondering why Disney is trying so hard to look great ahead of a proxy battle that it seemingly has in the bag, perhaps it's not the slam dunk that you might think it is. Analysts see pretty anemic top-line growth for the next couple of years, eyeing 3% in revenue growth this fiscal year and 5% in fiscal 2025.
The story gets a lot better on the bottom line. This isn't a surprise given Disney's commitment to achieve $7.5 billion in annual cost savings and turn its streaming business profitable by the end of its fiscal fourth quarter, which ends in September. The same Wall Street pros who see Disney posting soft revenue gains are modeling a 23% jump in earnings per share this year, followed by a 17% gain next year.
Disney is trading for a reasonable 21 times next fiscal year's earnings despite hitting fresh 52-week highs this week. The problem here is top-line growth. If analysts are right, by the end of fiscal 2025 Disney will have posted double-digit revenue growth just once over the seven previous fiscal years.
There is good news on that front. As bad as the past year has been for theatrical releases Disney has at least one potential blockbuster coming out every month this calendar year starting in May. New cruise ships and theme park expansions should keep that segment continuing to be a star performer.
So is Disney finally a good buy less than a month away from its annual shareholder meeting? I believe that Disney is attractively priced here, but I don't think you gain anything by trying to time the market. Disney's rebirth will take a couple of years to play out. Buying now makes sense. It's getting aggressive with positive changes ahead of the shareholder vote. If it somehow incredulously loses, the proposed activist changes could be the pixie dust the stock needs. Disney is in a rare win-win situation here. Investors in the leading media stock should probably start seeing it that way.
