Cramer says 'I don't want to fight Disney anymore' — here is what's next for the stock

Disney shares declined nearly 8% following mixed quarterly results, as revenue of $22.46 billion missed expectations despite adjusted EPS of $1.11 surpassing forecasts. While streaming subscriber growth exceeded projections, direct-to-consumer revenue and operating profit fell short due to weaker Hulu ARPU, and linear networks continued their decline, though Sports and Experiences segments showed strength. Analysts reacted by downgrading the stock and cutting its price target to $115, labeling it a "value trap." However, the company provided a more positive outlook, forecasting double-digit EPS growth for FY26 and FY27, increased operating cash flow, and announced plans to double share repurchases to $7 billion and raise its dividend by 50%.

Analysis

The Walt Disney Company (DIS) reported mixed fiscal Q4 2025 results, with revenue of $22.46 billion missing LSEG expectations of $22.75 billion, despite adjusted EPS of $1.11 surpassing the $1.05 consensus. This led to a nearly 8% stock decline and prompted analysts to downgrade the stock to a "3 rating" and cut the price target to $115 from $135, citing it as a "value trap." Annually, adjusted EPS fell 3%, contributing to the negative sentiment.

While streaming subscriber growth for Disney+ and Hulu exceeded expectations, direct-to-consumer (DTC) revenue and operating profit fell short due due to weaker average monthly revenue per user (ARPU) for Hulu's Live TV + SVOD offering. Linear networks continued to face pressure, with revenue falling 16% and operating income down 21% year-over-year. Conversely, the Sports segment, driven by ESPN, and the Experiences segment delivered strong operating income, with the latter achieving a record Q4 despite a revenue miss.

Despite the immediate challenges, management provided a more optimistic outlook, forecasting double-digit adjusted EPS growth for both fiscal years 2026 and 2027. The company expects $19 billion in operating cash flow and $10 billion in free cash flow for FY26, both exceeding estimates. Furthermore, Disney announced plans to double share repurchases to $7 billion in FY26 and increased its dividend payout by 50% to $1.50 per share, signaling confidence in future cash generation.

Key Decisions for Investors

• Monitor execution of FY26/27 guidance, particularly segment operating income growth and free cash flow generation, as these are critical for validating management's optimistic outlook.
• Evaluate the impact of the increased capital return program, including the $7 billion share repurchase and 50% dividend hike, on shareholder value and stock performance.
• Assess the turnaround trajectory of the DTC segment and the continued strength of Sports and Experiences, as these will be key drivers for future growth and profitability.