Disney Earnings: Experiences Softness Weighs on Results, but Much of Business Has Turned Up

Strength in experiences has been Disney's salvation over the past couple of years as the traditional media business has struggled with secular challenges. The script largely flipped during Disney's third quarter, as the streaming business continues to gain momentum; a return of box office success drove sizable licensing profits; and strength at ESPN blunted struggles throughout the rest of the linear television business. In experiences, waning demand and high costs stood out, but we see this as a cyclical bump rather than a structural crisis. We're maintaining our $115 fair value estimate, and we are more comfortable with Disney's business now than in recent years. We believe the stock is undervalued.