Disney Shares Sink Despite Solid Revenue Growth. Is It Time to Buy the Dip?
Key Points
Disney stock fell despite solid results as CEO Bob Iger is reportedly set to step down.
The company is seeing solid momentum in its streaming and theme park businesses.
The stock now looks attractively valued, providing a buying opportunity for investors.
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Shares of Walt Disney (NYSE: DIS) sank following its fiscal 2026 Q1 earnings release even though the entertainment giant demonstrated solid revenue growth that topped estimates. Investors seemed disappointed by reports that CEO Bob Iger plans to step down when his contract ends.
Disney owns a lot of franchises, so let's take a closer look at the company's results to see if now is a good opportunity to buy the dip.
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Streaming and theme parks lead the way
Overall revenue for Disney increased by 5% to $2.98 billion, ahead of the $25.74 billion consensus compiled by the London Stock Exchange Group. Adjusted earnings per share (EPS) fell 7% to $1.63 but came in above the $1.57 consensus.
Entertainment revenue rose 7%, while segment operating income sank 35% to $1.1 billion. The decline in segment operating income was largely due to higher programming and marketing costs. Within the segment, streaming revenue rose 11%, while operating income soared 72%.
Experience segment revenue, which includes theme parks, saw both revenue and operating income increase 6% year over year. Domestic park operating income climbed 8%, while attendance rose 1%.
Sports revenue edged up 1%, while operating income fell 23%. The results were hurt by the temporary loss of Disney's carriage deal with YouTube TV, owned by Alphabet. Here's a breakdown of Disney's most recent quarterly performance by segment:
|
Segment |
Q1 Revenue |
Change (YOY) |
Q1 Operating Income |
Change (YOY) |
|---|---|---|---|---|
|
Entertainment |
$11.6 billion |
7% |
$1.1 billion |
(35%) |
|
Streaming |
$5.3 billion |
11% |
$450 million |
72% |
|
Sports |
$4.9 billion |
1% |
$191 million |
(23%) |
|
Experiences |
$10 billion |
6% |
$3.3 billion |
6% |
|
Overall |
$26 billion |
5% |
$3.7 billion |
(9%) |
Data source: Disney. YOY = year over year.
For fiscal 2026, the company expects double-digit adjusted EPS growth. It is projecting double-digit operating income growth for its entertainment sector, low-single-digit operating income growth for its sports segment, and high-single-digit operating income growth for its experience segments. It is also continuing to project double-digit EPS growth in 2027.
Image source: Getty Images.
Should investors buy the dip?
While Iger is leaving, he has helped get the company back on track. Disney's streaming businesses are performing well, and the company expects the combination of Disney+ and Hulu to improve engagement and reduce churn. Meanwhile, it said its new ESPN Unlimited app is showing strong early adoption.
Disney's Theme Parks continue to perform well, and the addition of Frozen Land will nearly double the size of Disneyland Paris. Meanwhile, it's expanding its cruise line and will introduce its first ship with a homeport in Asia.
Trading at a forward price-to-earnings (P/E) ratio of below 16, based on current fiscal year analyst estimates, the stock is not expensive for a company that expects to grow its adjusted EPS by double digits over the next two years. Given the solid momentum across most of its segments and its low valuation, I'd be a buyer of the stock on this dip.
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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Walt Disney. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.
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