"Seize the opportunity to buy on the dip!" Analyst: Disney is clearing the way for "long-term profitability"

According to Zhītōng Finance, after Disney (DIS.US) announced that its second-quarter profit exceeded expectations this week, a senior analyst stated that the company is facing constructive improvements, paving the way for "long-term profitability." Seaport Research Partners senior analyst David Joyce described Disney's latest earnings report as "mixed blessings." Despite Disney's stock plummeting over 9% after the performance, he believes that the stock is undervalued after the revenue decline, suggesting that "the stock price is closer to $128, rather than the current $106."He stated, "There are indeed some positive surprises, such as the direct-to-consumer streaming business achieving profitability two quarters ahead of expectations. But expenses in other departments are also higher than expected."As of March 30, the world's largest entertainment company's adjusted earnings per share (excluding some special items) rose to $1.21, surpassing the average Wall Street analyst expectation of $1.12. The operating profit of business segments, including Disney theme parks, increased by approximately 12% year-on-year, while the operating loss of Disney's streaming business in the second quarter decreased significantly from $659 million in the same period last year to $18 million.However, in terms of overall revenue, Disney's total revenue for the second quarter ending March 30 was approximately $22.08 billion, a 1% year-on-year increase, slightly lower than the analyst average expectation of $22.15 billion.Joyce said, "In fact, I believe ultimately the next quarter will be soft again, as different sports event timings will affect sports profitability, (and) different events will affect streaming profitability."He added that the outlook for Disney in the fourth quarter ending in September looks brighter. He said, "By then, they will start cracking down on account sharing, which will certainly help increase user numbers and revenue." He cited Netflix's success in cracking down on password sharing restrictions implemented nine months ago.Joyce pointed out that as Disney adapts to profitable streaming services, investors will begin to consider long-term profitability and what Disney+ means for the future of the entertainment industry. He said, "I do believe there is upside potential in the stock price. I will take advantage of this pullback, expecting a significant increase in the stock price over the next three to six months."Furthermore, Joyce mentioned that theme parks account for a significant portion of Disney's profits, with "better comparability in the fourth quarter." Joyce stated, "Considering long-term profitability, the licensing rights here are very valuable. Theme parks are driving profitability. They still see strong demand, although they do indicate they are returning to normal demand, not the double-digit growth they saw after the pandemic, but demand for all new attractions still exists. All their theme parks are like this. This is a factor supporting long-term valuation metrics."