Jim Cramer: Disney shares 'can go much higher' after record box office weekend

Following Disney's record-breaking Memorial Day weekend box office performance with "Lilo & Stitch," which grossed $183 million domestically and $314 million globally, CNBC's Jim Cramer reiterated his bullish stance on Disney (DIS), stating the stock is undervalued and has significant earnings potential. Citing CEO Bob Iger's focus on profitability and franchise storytelling, along with the recent appointment of CFO Hugh Johnston, Cramer believes Disney's film and theme park businesses are now performing strongly, driving further upside for the stock, which saw a 2% pop on Tuesday.

Analysis

The Walt Disney Company (DIS) has demonstrated significant positive momentum, underscored by the record-breaking Memorial Day weekend box office performance of its live-action "Lilo & Stitch" update, which grossed $183 million domestically and $314 million globally. This achievement, substantially outperforming competitor releases, contributed to a 2% increase in Disney's share price. This success builds upon a strong second-quarter earnings report where the company exceeded revenue and profit expectations and issued upbeat guidance, previously fueling an approximately 11% stock rally. Analyst commentary, notably from CNBC's Jim Cramer, suggests Disney's stock, trading around $111 per share, remains undervalued with considerable upside potential. This optimism is attributed to CEO Bob Iger's strategic initiatives focusing on profitability, creative control over core franchises, and a return to broadly appealing family entertainment, further supported by the recent appointment of Hugh Johnston as CFO, who is expected to bring financial stability. The strong performance in the film division, coupled with anticipated strength in its theme parks, indicates Disney's key business segments are gaining traction, potentially leading to enhanced earnings power.

Key Decisions for Investors

• Investors may consider the recent positive catalysts, including record box office figures and strong Q2 earnings, as supportive of a bullish thesis for Disney (DIS) at its current valuation.
• Monitor the ongoing execution of CEO Bob Iger's strategic priorities, particularly in franchise development and cost management, and the impact of new CFO Hugh Johnston on financial discipline and stability.
• Given analyst assertions of undervaluation and significant earnings potential as core segments like film and theme parks recover, current share price levels may present an attractive entry or accumulation point for long-term investors.