1 Growth Stock Down 44% to Buy Right Now

With the broad market indexes are trading near their all-time highs, investors might be discouraged because they’re finding fewer places to park their hard-earned savings. It’s understandable to think that solid bargains are hard to come by these days.

However, I’m here to tell you to remain optimistic. In fact, investors have a great opportunity right now to buy a growth stock recently trading 44% below its peak. Here’s what you need to know.

Streaming profitability

Investors should consider scooping up shares of Disney (DIS 0.59%). The media and entertainment powerhouse lost Wall Street’s confidence in recent years due to the decline of linear TV, which historically was a thriving business line.

The rise of streaming services spurred the ongoing cord-cutting trend that has resulted in fewer households each year subscribing to traditional cable-TV packages. This has been a headwind for Disney’s revenue and earnings.

But the world is shifting to one dominated by direct-to-consumer (DTC) streaming entertainment. As a result, Disney ramped up technology and content investments to successfully navigate this transition. The stock has been under immense pressure as profits took a hit.

Brighter days appear to be on the horizon. Disney’s Q4 2024 (ended Sept. 28) financial results revealed a company that’s clearly heading in the right direction. Revenue increased 6% year over year, with operating income up 23%. However, these robust headline figures mask what’s happening under the hood.

For the fiscal fourth quarter, Disney’s DTC operations (including Disney+, Hulu, and ESPN+), which are clearly going to be a main driver of fundamental performance in the future, reported operating income of $321 million, a huge reversal from the $387 million loss in Q4 2023. Getting this segment in the black has been the executive team’s top priority.

Disney+ (excluding Hotstar) added 4.4 million net new subscribers and raised prices, which helped drive the top line for the overall DTC division 13% higher. And a focus on controlling spending helped the bottom line, with DTC operating expenses essentially flat year over year. It’s very encouraging to see revenue increase when costs stayed the same, and points to the value that Disney provides for viewers.

Management typically doesn’t provide guidance years in advance, but this time they did, which indicates confidence in Disney’s trajectory. Leadership expects DTC operating income to surge to $1 billion in fiscal 2025, compared to $143 million for all of fiscal 2024. And for fiscal 2026, Disney hopes to achieve a 10% DTC operating margin.

It’s not difficult to believe the business can achieve ongoing DTC sales and earnings growth. No company in the industry can match Disney’s intellectual property, with characters and stories that resonate strongly with a global audience. Being able to offer bundled streaming packages is another strategy to boost subscriber growth and engagement while keeping churn rates in check.

Executives also plan to sensibly increase prices on the streaming services, another lever they can pull. And with the launch of a stand-alone ESPN streaming service in the fall of 2025, the company’s DTC segment will be able to fully satisfy the needs of an entire household, from children’s programming and educational documentaries to general entertainment and live sports.

Disney’s valuation

I’ve discussed the potential of Disney’s streaming operations as investors look ahead. This is a major growth opportunity the business is starting to capture.

However, the company also has a successful experiences division, which houses its popular theme parks, cruise lines, vacation properties, and consumer products. In the past five fiscal years, this segment saw revenue and operating income increase 30% and 37%, respectively. Management’s plan to double capital expenditures to $60 billion over the next decade highlights its bullishness.

Investors are only being asked to pay a forward price-to-earnings ratio (P/E) of 21.3 to buy Disney stock right now. That represents a slight discount to the overall S&P 500. It’s a smart idea to consider adding shares to your portfolio.