The Walt Disney Company (NYSE:DIS) surged 10% on Wednesday, and it is extending those gains even more as of writing. The company posted fiscal Q2 results that exceeded Wall Street expectations as it reported EPS of $1.45 on $23.62 billion of revenue. Analysts expected $1.2 in EPS and $23.17 billion.
This positive surprise has investors wondering if Disney is back on track and whether now is the time to buy.
Revenue grew 7% year-over-year, and EPS grew 20%. Diluted EPS hit $1.81. This is a big flip from a loss of $0.01 per share they had in the same quarter last year. Their total segment operating income from all segments also grew by 15% to $4.4 billion.
One of the biggest surprises was how many new subscribers Disney+ got. The service pulled in 1.4 million new sign-ups. This brought its worldwide total to 126 million. Disney itself thought they might see a small drop, and analysts weren't expecting this either.
Disney also announced plans to build its seventh theme park resort on Yas Island in Abu Dhabi, in partnership with local developer Miral Group. This will be Disney's first park in the Middle East.
Even after the most recent surge, you can grab DIS stock at a 28% discount from its pre-COVID prices. The stock isn’t cheap by any means at 20 times earnings (minus non-recurring items), but this is still cheap vs. the 23.3 times PE DIS stock has historically traded at.
All that said, I wouldn’t buy into this right now. The earnings seem mostly priced in, and paying this much for DIS stock when the company still has $42.9 billion of debt on its balance sheet seems too much. There are no special growth or defensive attributes here to justify taking all that downside risk right now.
