Shares of Walt Disney (NYSE: DIS) fell 7.4% on Feb. 2 in response to the company’s fiscal 2026 first-quarter earnings report, pushing the stock down close to an eight-month low.
Weak results from Disney’s sports segment, along with higher projected spending and lower profitability for the first half of fiscal 2026, may be to blame for the market’s negative reaction.
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Here’s why those concerns are overblown, why the company has a clear runway for rewarding patient investors, and five reasons the value stock is a top buy.
Disney’s experiences segment, led by its parks and cruise line — continues to be the driving force behind the company’s earnings rebound.
As you can see in the chart, Disney’s margins and earnings are still below their pre-pandemic highs. But dig deeper, and you’ll find that the experiences segment is at record highs.
If we look at Disney’s quarter ended Dec. 28, 2019, which was the last quarter that was unaffected by the pandemic-induced slowdown, the company had $7.4 billion in parks, experiences, and products revenue and $2.34 billion in the segment’s operating income. The quarter ending Dec. 27, 2025 — the one it just reported on Feb. 2 — had $10 billion in experiences revenue and $3.31 billion in operating income. So the segment has grown revenue significantly despite a multiyear slowdown, and its operating margins have increased to 33.1%.
Businesses can do really well when they can grow revenue from their most profitable segments without impacting margins. Disney will do very well if it can expand its parks, cruises, and other forms of entertainment without saturating the market and driving margins down.
Its impressive results show that there is global demand for its experiences offerings, and that it isn’t overexpanding with bold ideas like a new theme park in Abu Dhabi in the United Arab Emirates, building new rides and attractions at existing parks, or continuing to crank out a new cruise ship every year or so.
The experiences segment is the single best reason to load up on Disney stock. But there are other factors that support the investment thesis beyond that ace in the hole.
Disney’s streaming video-on-demand (SVOD) segment consists of services like Disney+, Hulu, and Disney+ Hotstar, but excludes sports-related streaming like ESPN, Hulu Live TV, and FuboTV services (Disney owns a 70% stake in FuboTV). Just a few years ago, the company was losing money on streaming as costs mounted to produce content and gain subscribers. But SVOD is now consistently profitable, and its margins are growing.
SVOD operating income more than doubled from $189 million a year ago to $450 million in the latest quarter. The segment’s operating margin for the quarter was 8.4%. But the company should be able to grow those operating margins over time as it focuses on SVOD profitability rather than solely growing subscriber numbers.
Before the pandemic, Disney was having its best box office years in history, largely due to major hits in the Marvel and Star Wars series. But a combination of saturated content and movie theaters shutting down during the pandemic has made its feature films go from a star-studded cast to a drag on the broader business.
That all changed in calendar year 2025, with $6.45 billion in global box office revenue, the third-highest year in company history. As usual, results were driven by a handful of major hits: Avatar: Fire and Ash, Zootopia 2, and the live-action version of Lilo & Stitch — all of which exceeded $1 billion in calendar year 2025 revenue.
Disney aims to build on that momentum in calendar year 2026 with highly anticipated films like Avengers: Doomsday and Toy Story 5.
In its first-quarter fiscal 2026 earnings release, Disney said that it’s on track to repurchase $7 billion in stock in fiscal 2026, backed by $19 billion in anticipated cash flow from operations.
Buying back shares is an excellent way to return capital to shareholders, especially when the stock is beaten down. And $7 billion is a huge commitment, especially in a single calendar year.
With a market capitalization of $186.2 billion at the time of this writing, $7 billion in buybacks would effectively reduce Disney’s share count by 3.8% — which would accelerate growth in earnings per share (EPS) with fewer shares to go around. The actual number will vary based on Disney’s fluctuating stock price. Still, the aggressive buyback program is a sign that management believes its stock is a good value.
Disney’s valuation is significantly below its historical average.
The discounted valuation would make sense if the company weren’t doing well. But it’s operating at its most efficient level since before the pandemic. Guidance is strong, too, with double-digit adjusted EPS growth expected in fiscal 2026.
Add it all up, and Walt Disney stands out as a top value stock to buy now.
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Daniel Foelber has positions in Walt Disney and has the following options: long January 2028 $100 calls on Walt Disney and short February 2026 $110 calls on Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
5 Reasons to Buy Disney Stock Like There’s No Tomorrow was originally published by The Motley Fool
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
