Key Points

Disney impressed investors last fiscal quarter, increasing revenue across the board and growing the Disney+ subscriber base. The announced plan to open a new theme park in the Middle East highlights the value of Disney's intellectual property. Shares have surged in the past month, but the valuation remains reasonable. 10 stocks we like better than Walt Disney ›

Since Walt Disney (NYSE: DIS) reported financial results for its fiscal 2025 second quarter (ended March 29), shares are up a noteworthy 9% (as of May 14). Revenue increased 7% year over year to $23.6 billion, while adjusted earnings per share (EPS) jumped 20%. Both of these headline figures came in ahead of Wall Street's expectations.

Despite the momentum, shares trade at a gut-wrenching 45% below their all-time high. Owning the business hasn't worked out well for investors in recent years. But there are reasons to be bullish on Disney.

Should you buy this consumer discretionary stock in May and hold it for five years? Image source: Walt Disney.

Reporting a solid quarter

Investors are worried about the direction of the economy. In theory, recessionary fears should hurt Disney's business because of the discretionary nature of its products and services. However, the latest quarterly results eased any worries for now.

Driving top-line growth was expansion at all three company segments (Entertainment, Sports, and Experiences). While linear TV remains a headwind, Disney is aiming to successfully navigate the changing media landscape. The company added 1.4 million net new Disney+ subscribers, bringing the total to 126 million. Including Hulu, that figure is 180.7 million.

The direct-to-consumer (DTC) streaming segment registered another quarter of profitability, showcasing its ability to create a sustainable model. Operating income came in at $336 million for the division, which will be a pivotal part of Disney's future success.

The executive team expects a "modest increase" in Disney+ subscribers in Q3. Even more exciting, management upped their forecast, as they now believe adjusted EPS will surge 16% in fiscal 2025, much better than prior guidance of a high-single-digit increase.

New developments

Investors will certainly be optimistic about two key developments with the company.

The first is the upcoming and highly anticipated launch of the stand-alone ESPN streaming service. Consumers who want access to all 47,000 live events will be asked to pay $29.99 per month. This is targeting the tens of millions of households that are sports fans, but don't have access to ESPN. Thanks to a DTC approach that leverages data and technology, Disney will create a unique and personalized experience that wasn't possible before.

Story Continues

Another announcement, one that was a surprise, was that Disney will partner with Miral, a developer in the leisure and entertainment space, to open a new theme park in Abu Dhabi. It's worth mentioning that this endeavor is not part of the $60 billion of capital expenditures Disney has planned in the next decade for the Experiences segment. The beauty of this arrangement is that it will require no cash commitments. Disney will simply collect a royalty stream from its intellectual property (IP).

The introduction of the ESPN DTC app, as well as the opening of a new theme park, can certainly drive greater revenue and earnings power over the long term.

Quality at a reasonable valuation

Disney shares have soared 32% in the past month. While the stock isn't as cheap as it was in mid-April, the valuation still looks reasonable, in my opinion. Shares trade at a forward P/E ratio of 19.3.

For that price, investors will get to own a business that has a wide economic moat. This is exemplified by the previously mentioned announcement to build a new theme park. Disney's IP is so valuable, supported by its various studios, franchises, and characters, that third parties are willing to invest the time and take on heightened financial risk to bring these experiences to different parts of the world. Disney is in a prime position to continue monetizing its IP.

This makes it a top stock in the media and entertainment space. Buying shares now and holding for five years should result in a favorable outcome.

Should you invest $1,000 in Walt Disney right now?

Before you buy stock in Walt Disney, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Walt Disney wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $642,582!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $829,879!*

Now, it’s worth notingStock Advisor’s total average return is975% — a market-crushing outperformance compared to172%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

Neil Patel and his clients have positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.

Should You Buy Disney Stock in May and Hold for 5 Years? was originally published by The Motley Fool

View Comments