Disney (DIS) is trading below $85 per share, nearly 30% off its 52-week high. This level echoes the darkest days of COVID, when the company’s business faced an existential crisis. Today’s sell-off isn’t about collapse. It’s about discomfort. Geopolitical friction, a softening consumer, and years of underperformance have worn down investor confidence. But sometimes the best time to revisit a business is precisely when others are questioning it.
I’m not dismissing the risks. Tariffs, U.S.–China tensions, and rising anti-American sentiment pose real challenges for a global brand that depends on travel, consumer sentiment, and discretionary spending. These pressures could impact box office revenue, international Disney+ growth, and attendance at Disney’s parks, hotels and cruises. I also do not want to dismiss the potential impact of economic deterioration which would compound Disney’s challenges.
But below $85, it is worth exploring whether there is an opportunity here.
While we need to explore the progress made since CEO Bob Iger returned, I want this to be an evaluation of the path forward. To a certain extent, it will require looking beyond near-term challenges. Disney once earned its place as a compounder, with enviable ROIC, margin durability, and a flywheel of monetized IP. The question now is whether the current strategy, one focused on streaming scale, ESPN transformation, and high-return expansion in experiences, can credibly return Disney to that status.
It appears that at these price levels, the market is pricing in the risks. It also appears that Disney has made solid progress, supported by tangible financial results, leaving room for reasonable upside.
Bob Iger’s Turnaround: Progress and Plans
When Bob Iger returned as CEO in November 2022, Disney was struggling. Streaming losses had ballooned to $1.47 billion in Q4 2022, the post-COVID park rebound was uneven, Disney found itself in the center of a political divide, and linear television was in visible decline.
Iger laid out a bold plan to restore Disney’s standing including to achieve streaming profitability, a cost-cutting initiative, transform ESPN, and focus on quality over quantity at its studios.
Two-Year Performance Overview
To evaluate Iger’s impact, it helps to zoom out and look at the company’s recent financial trajectory. In fiscal 2023, Disney posted $88.90 billion in revenue, up 7% from $82.72 billion in 2022, largely on the back of continued recovery at the parks and improved streaming traction. Fiscal 2024 added another 3% growth, bringing revenue to $91.36 billion, even as hurricanes disrupted operations and the linear business continued its decline.
More importantly, margins improved. Total segment operating income margins expanded from 14.5% in 2023 to 17.1% in 2024, driven by profitability in streaming and better studio performance. Free cash flow nearly doubled, jumping from $4.90 billion in 2023 to $8.56 billion in 2024. That’s a 75% year-over-year increase. This allowed Iger to reinstate a dividend, issue a $3 billion share repurchase plan for 2025, and help chip away at the company’s nearly $50 billion in total debt.
Disney also followed through on its $7.5 billion cost-cutting plan, hitting the target by 2024. These savings are now being reinvested, especially into parks, cruises, and ESPN’s streaming infrastructure. In short, Disney is operating with more financial discipline, more focus, and better returns. Risks remain, but structurally, the company is moving in the right direction.
A Closer Look At Progress Within Key Segments
Drilling into segments, Iger’s strategy shows mixed but promising results by Q1 2025.
Streaming Profitability: A Milestone Reached, but Momentum Slows
The streaming business (Disney+, Hulu, and ESPN+) has turned profitable ahead of schedule. In Q1 2025, the segment posted $293 million in operating income, a sharp swing from a $138 million loss a year ago. Q4 2024 also showed $321 million in operating income, compared to a $387 million loss the year prior. This reflects disciplined cost management, bolstered by $7.5 billion in expense reductions completed by 2024.
To assess streaming progress, the table above tracks subscribers and average revenue per user (ARPU) from Q1 2023 to Q1 2025 for Disney+ Domestic, International, and Core, Total Hulu, and ESPN+. These were chosen for comparability after the November 2024 deconsolidation of Disney+ Hotstar due to the Star India merger.
Subscribers have grown at a healthy rate since Iger took the reins and ARPU has climbed across all platforms.
This has driven margins in the DTC business to ~4.8% (excluding ESPN) along with the cost efficiencies, and early traction from Disney’s advertising technology and password-sharing crackdown.
That said, the picture isn’t entirely rosy. Subscriber momentum has slowed. Disney+ Core fell by 0.7 million in Q1 2025. This raises questions about the platform’s stickiness, particularly as macro headwinds, content saturation, and intensifying competition persist.
Studio Performance Rebounds, But Brand Perception Is a Risk
Disney’s studio segment bounced back at the box office in 2024. Inside Out 2, Deadpool & Wolverine, and Moana 2 took the top three spots globally. This drove $316 million in operating income for Content Sales & Licensing in Q4, up from a $149 million loss in Q4 2023.
That said, Disney’s reputation has taken a hit in recent years. Political controversies began under Iger’s predecessor and have continued into Iger’s tenure. Accusations of “woke” storytelling and backlash against projects like the live-action Snow White have stirred debate. While some audience segments remain loyal, others feel alienated. Whether this impacts brand equity long-term or simply shifts the audience base is still unclear.
Parks Represent the Sturdy Foundation
Parks remain Disney’s most reliable cash engine. We can argue that Iger’s performance in parks has been mixed. Disney’s theme parks (Experiences) performed solidly from Q1 2023 to Q1 2025, with revenue rising 7.8% from $8.736 billion to $9.415 billion. This has been driven by international growth (+12%) and cruise expansion. Operating income grew 1.9% from $3.053 billion to $3.110 billion, though the margin slipped from 35.0% to 33.0% which management attributed to domestic hurricanes ($120 million impact) and pre-opening costs ($75 million). Q1 2025 saw international parks surged 28% which offset a 5% domestic dip.
Despite cyclical risks, parks remain a cash flow machine, supporting long-term value if execution persists. Disney projects 6%–8% revenue growth for the segment in 2025, though, these projections may be stale.
Investment Returns: Iger’s Two-Year Progress
Bob Iger’s return in November 2022 marked a pivot for Disney, with financial discipline driving value creation. We will use Return on Invested Capital (ROIC) to assess Iger’s progress.
In 2022, I questioned Disney’s quality as the company transitioned from linear to streaming. ROIC languished at ~3.5%, weighed down by streaming losses around $4.0 billion and park recovery costs post-COVID.
By 2023, ROIC edged up to ~3.7%, as parks rebounded (7% revenue growth) and Iger’s cost cuts began.
Fiscal 2024 saw a leap to nearly 7%, fueled by streaming’s profitability, studio hits, and $7.5 billion in savings. Q1 2025’s annualized ROIC of ~7.8% is still dwarfed by pre-COVID levels, but we can at least glean some hope from that Iger’s strategy is showing progress.
Future Plans: Scale, Efficiency, and ESPN’s Streaming Pivot
Looking to the future, in March of 2024, Disney laid out a $60 billion investment roadmap.
The company earmarked about 70% of the investment for park and cruise expansion, including the new Disney Treasure ship and large-scale additions across properties globally. Another 20% is focused on streaming infrastructure, most notably the launch of the ESPN flagship streaming service in fall 2025. These efforts aim to restore margin durability and expand Disney’s TAM.
The remaining 10% of CapEx is targeted toward studios, including high-ROI franchises like Zootopia and Frozen. With linear media fading, Disney is repositioning its flywheel using theatrical content and new tech to boost engagement across streaming, experiences, and merchandising.
If the progress Iger has made thus far is any indication, then investors should have some confidence that this plan should continue to drive improvements for the company, despite the questions that still remain.
Key Trends to Monitor: Linear Networks’ Decline and Streaming’s Offset
One area of concern for Disney is deterioration of the linear networks business. Perhaps more importantly is answering the extent to which streaming can offset this decline.
In the early 2010s, Linear networks reliably produced 30%+ operating margins, with ESPN leading the charge. Cord-cutting and declining viewership have driven consistent revenue erosion.
Here’s the trajectory:
Despite this erosion, the segment remains highly profitable. It generated ~$3.45 billion in operating income in FY2024, with ~38% domestic margins. Now, the fading financial engine that historically fueled Disney’s broader ambitions, including its early streaming expansion, faces secular decline.
Can Streaming Fill the Gap?
The company’s future now depends on whether its streaming business can fill that void. The good news is that under Iger, DTC has reached profitability. While this is encouraging, linear still generates significantly more income, and with higher margins. To close the gap, Disney must continue to scale and monetize DTC far more effectively. Efforts surrounding ESPN+, price increases and a password-sharing crackdown have begun to show signs of improved monetization.
Much of this improvement has come without the yet-to-launch ESPN flagship product, expected in late 2025. This platform will consolidate linear ESPN, ESPN+, and new features like betting integration and personalization. If successful, this offering could significantly boost DTC margins and open up new monetization channels. Combined with disciplined content investment and with cost cuts already banked, Disney is positioning the DTC segment to scale profitably. There are risks though, particularly around competition for sports rights.
Here are two possible scenarios.
Optimistic Scenario
By 2027, streaming could reach $2.5–$3 billion in operating income, assuming:
- 5% annual subscription growth from 178 million,
- 4% ARPU increases,
- 10% margins (per Q4 2024 guidance).
This would match linear’s projected ~$2 billion operating income (assuming a 7% decline). This outcome for streaming would most likely be driven by ESPN flagship success and ad growth. Even with geopolitical risks, Disney’s global reach supports this outcome.
Cautious Scenario
Streaming hits only $1.5 billion in operating income by 2027:
- flat subscriptions due to churn, boycotts or pricing pushback,
- 7% margins amid ESPN costs and content spend.
This would assume the ESPN flagship rollout saw only moderate adoption. While not the end for DTC’s potential, this scenario elongates the timeline for DTC to offset the linear business.
While execution will be critical to the outcome, the capability appears to be there. For long-term investors, this becomes the crux of the thesis: If Disney can continue executing against this strategic pivot, the market may be underestimating how much value remains to be unlocked.
Valuation: A Spectrum of Scenarios
As we have explored thus far, while Disney possesses foundational stability and potential, much uncertainty remains regarding execution in its transition. This is compounded by the economic and geopolitical climate we find ourselves in, making valuation no simple task. Still, attempting to determine a fair price for Disney given the qualitative and quantitative exploration thus far seems worthwhile.
Rather than pinning hopes on a single price target, however, it makes sense to explore a range of outcomes through different discounted cash flow (DCF) scenarios.
DCF Scenarios
Using an 7.5% discount rate (reflecting WACC), and a 3% terminal growth rate, I model three cases:
Bull Case ($118/share, +42%): Projects 5% 2025 revenue growth to $95.9 billion, and 16% EBIT margins by 2027. This matches guidance’s high single-digit EPS (~$5.42) and $8 billion CapEx, reflecting the $60 billion investment roadmap. In this scenario, streaming hits $3 billion income, leveraging Q1 2025’s $293 million and ESPN flagship potential, with no recession or boycott backlash. Parks grow by 8%, per 2025 guidance and Q1’s $3.11 billion income, as the tariff standoff eases.
Base Case ($100/share, +23%): Assumes flat 2025–2026 revenue ($91.4 billion), a decline in EBIT margins (13–14%) and FCF before a recovery in 2027. Then, low single digit revenue growth going forward with margin expansion to 16%. This reflects near term headwinds mentioned in the article which limit parks and DTC. 2025 CapEx is modeled at $7.5 billion (below $8 billion guide for 2025), reflecting cost caution, but still reaching management’s investment roadmap over the next 10 years.
Bear Case ($70/share, -15%): Envisions -4% 2025 revenue ($87.7 billion), 11% margins, $4.5 billion FCF. A trade war and recession crush parks, DTC stalls (4.8% margin) as subs decline, and linear declines accelerate. CapEx cut to $6.5 billion in 2025, with ESPN flagship delays. Low single digit revenue growth follows a difficult 2-3 years after which revenue growths low single digits, margin recovery takes hold and Capex normalizes to achieve long term goals.
Valuation Insight
These scenarios provide a wide price range spanning $70–$118. This accurately reflects the reality of investing in a complex, global business undergoing transformation amid macro uncertainty. Crucially, the bear case reflects a genuinely difficult environment, and even then, the downside appears limited. The base case assumes continued near-term pressure on the parks, continued weakness in the linear business, and modest streaming gains, which is not exactly rosy. Still, this supports Disney’s current valuation, and that’s telling.
Below $85, shares are trading near the bottom of this range, suggesting a reasonable risk-reward. If Disney can continue its momentum in streaming, sustain parks profitability, and get ESPN’s pivot right, the stock looks like a reasonable long-term bet, priced for a difficult present but not an impossible future.
Final Thoughts: Navigating Uncertainty, Leaning on Strength
As we’ve explored, Disney isn’t without challenges. Linear continues to decline. Streaming, while profitable, still has work to do. And the geopolitical environment creates a series of challenges for Disney; most notably being a cloudy economic future. But there’s also real progress under Bob Iger which is measurable in both financial results and strategic clarity.
If Disney can continue to scale profitability in DTC, unlock value through ESPN, and maintain the park segment’s stalwart performance, the business could regain some of its former margin strength and capital efficiency. Add to that its deep reservoir of intellectual property, more focused content creation success, and a proven flywheel across experiences and merchandise, and the stock might look interesting; even in a difficult near-term environment.
Valuation, like Disney’s current position, is uncertain. But if we look out a few years and the company executes on even a portion of its strategic goals, Disney has the potential to outperform what the market is currently pricing in.
Disclosure: I have a long equity position in The Walt Disney Company.
