Buy Disney for the long term, this investor says

Portfolio manager Christine Poole has been holding onto Disney (Walt Disney Company Stock Quote, Charts, News, Analysts, Financials NYSE:DIS) stock for a number of years, but while the recent past has involved a lot of ups and downs for the Mouse House, investors can expect shares to bounce back along with the company’s bottom line, says Poole, who thinks Disney will look a lot more attractive once its streaming business reaches profitability.

“I think all the streaming operators have realized that you can’t do this regardless of costs,” said Poole, CEO of GlobeInvest Capital Management, who nominated Disney as one of her Top Picks for the 12 months ahead on a BNN Bloomberg segment on Friday. 

“Disney has announced a restructuring program and they reaffirmed their streaming business will be profitable by the end of fiscal 2024, so that’s September of next year,” she said. “It lost about $1.1 billion this past year, so if they can get to breakeven that’s going to contribute to the bottom line.”

Earlier this month, Disney announced it’s streamlining the business and cutting about 7,000 jobs from its workforce in an effort to deliver $5.5 billion in cost savings. Disney will now operate under segments Entertainment, ESPN and Parks and Experiences, with old-but-new CEO Bob Iger taking back the helm, at least for the time being, with a two-year contract.

“Our strategic restructuring will return creativity to the centre of the company, increase accountability, improve results, and ensure the quality of our content and experiences,” Iger said in a press release.

Disney shares have been stuck around the $85-$120 range over the past year, which puts the stock well off highs hit early in 2021 at just under $200. 

But Poole says having Iger back looks good on Disney, as he steered the ship through some transformative periods in the recent past.

“We’ve owned Disney for a number of years and so we’ve lived through downturns on this stock as well,” Poole said. “We were very encouraged that Bob Iger is back. He was CEO from 2005 to 2020, and I think they did a great job when he was there. He oversaw the acquisition of Pixar, of Marvel and Lucas Films.”

“Now, they’re going to refocus on costs,” she said. “This is a long term play, and [streaming profitability] is not going to happen overnight. I think it’s going to take a few years, but there is a lot of value in their product portfolio and all their brands and the company is under-earning their potential right now.”