After Earnings, Is Disney Stock a Buy, a Sell, or Fairly Valued?

Walt Disney released its fiscal fourth-quarter earnings report on Nov. 13. Here’s Morningstar’s take on Disney’s earnings and stock.

Key Morningstar Metrics for Walt Disney Stock

• Fair Value Estimate: $120.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Walt Disney’s Fiscal Q4 Earnings

Disney stock fell substantially after the firm reported a 0.5% year-over-year decline in fiscal fourth-quarter revenue. The weakness was entirely in linear entertainment networks and theatrical films. Results in parks and experiences, streaming, and sports were encouraging, as is the 2026 outlook.

Why it matters: Linear entertainment networks are becoming inconsequential, and theatrical sales depend on film release schedules and success, which last year had Inside Out 2 and Deadpool & Wolverine. Quarterly choppiness is expected and not indicative of business health or prospects.

The bottom line: We maintain our $120 fair value estimate and believe the selloff makes Disney’s stock attractive. The critical pieces to our valuation are continuing strength in experiences—the most important component underpinning our wide moat rating—and streaming. Results in both areas were good.

Coming up: Disney has two new cruise ships launching in fiscal 2026. Cruise demand remains high, and domestic parks bookings for 2026 are up 3%. We believe the experiences assets will drive durable long-term segment growth, which is most critical to Disney’s financials.

• Fourth-quarter experiences sales grew 6% year over year, while operating income grew twice as fast.

Key stats: Fourth-quarter streaming entertainment sales (excluding ESPN) were up 8% year over year (10% organically). The 8.5 million Hulu net additions were mostly due to the inclusion of Hulu access for Charter pay-TV subscribers at the end of the quarter.

• Disney+ organically added 4 million subscribers, including 2.5 million internationally, where management is targeting more content investment. Also encouraging, 80% of ESPN streaming subscribers are taking the bundle with Disney+ and Hulu.
• Disney’s ability to bundle entirely with its own platforms, plus its willingness to bundle with others, contributes to our view that its streaming services will remain winners as the television industry continues to evolve.

Fair Value Estimate for Walt Disney

With its 3-star rating, we believe Disney’s stock is fairly valued compared with our long-term fair value estimate of $120 per share, which includes our projection for a modest economic slowdown that dampens demand at Disney’s theme parks and other experiences in fiscal 2026 and 2027. Our fair value estimate implies a P/E multiple of 23 times our adjusted earnings estimate through 2026.

Read more about Walt Disney’s fair value estimate.

Economic Moat Rating

We assign Disney a wide moat based on its intangible assets. Ultimately, we believe the firm’s ownership of timeless characters and franchises and its ability to continue creating and attracting top-tier content outweigh its near-term challenges in an evolving media industry. Although we think it’s likely that a media industry not built upon the traditional pay-TV bundle will prevent Disney from returning to the level of economic profitability it routinely achieved in years past, we still expect the firm’s returns on invested capital to comfortably exceed its cost of capital over the next 20 years.

Read more about Walt Disney’s economic moat.

Financial Strength

Disney is in sound financial health, even as the debt load and financial leverage are higher than they’ve been historically. Disney ended fiscal 2024 with with $37 billion in net debt and a 1.9 net debt/EBITDA ratio.

With the cash burn in its streaming business now in the past and the remaining stake in Hulu fully paid for, Disney’s balance sheet should continue improving as free cash flow remains well above the levels it achieved during the first several years of this decade. The firm generated over $8 billion in fiscal 2024, and despite heightened near-term investment, we anticipate a similar level in 2025 and 2026 before further acceleration.

Read more about Walt Disney’s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for Disney is High. The evolution of the media industry that is currently taking place is the main factor behind our assessment. Outside of its experiences business, Disney historically had three main sources of revenue: fees that it received from pay-TV distributors to carry the Disney bundle of channels, advertising, and licensing fees for movies and television programming distributed by third parties. Each of these revenue sources are now under pressure. Cord-cutting and diminished linear television viewership have depressed carriage fees and advertising revenue. Changes at the box office—from less attendance, fewer movies, and shorter theater windows—have been a headwind to licensing revenue.

Read more about Walt Disney’s risk and uncertainty.

DIS Bulls Say

• No peer can match the depth of Disney’s iconic characters, franchises, or content library, which will keep the firm’s streaming services in high demand and give it a leg up in creating new movies and television shows.
• Disney’s streaming services will become a major driver of profits and offset linear declines. The existing DTC business has made a major turn to profitability, and the introduction of traditional ESPN as a streaming service in 2025 should fuel further demand.
• The allure of Disney’s parks business is unmatched and will be a continuing profit engine.

DIS Bears Say

• Linear television will continue to decline. Even if successful, newer revenue sources like direct-to-consumer streaming will never equal the profitability Disney once enjoyed.
• Disney now competes with tech companies for major sports rights, which may have incentive to continue driving up prices. Sports remains material to Disney’s future, and being forced to pay up for the critical content will depress profits.
• Too many streaming platforms now exist, and it’s questionable whether consumers will be willing to pay high prices or stick with individual services month in and month out.

This article was compiled by Frank Lee.