Why Has Star Wars Owner Disney's Stock Price Fallen Below Its Price 10 Years Ago?

Disney stock seems like a buy for most investors according to stock fundamental indicators. The company reflects profitability with its quarterly revenue growing continuously. Though the revenue figures depict the positive side of Disney, the cash flow figures for the most productive division of the brand indicates the negative side of it. 

The company's Experiences division, which oversees the operations of the Disneyland theme parks and attractions, is its primary cash cow. The Experiences division generated $8.95 billion for FY2023, which is miles above the $2.46 billion attributed to Sports and the $1.44 billion attributed to Entertainment.

A closer look at the individual business units enables us to notice the cracks in the company's image, which ultimately influences the decision-making of investors as and when they consider making a stable long-term investment.

The struggling Entertainment segment, which makes up the Disney+ streaming service, has been burning cash for the company since its launch in 2019. While the lockdown measures during COVID-19 were a definite tailwind for the company, the lifting of stay-at-home mandates saw the streaming service fall back into relative obscurity.

The sci-fi movies under the banner could not manage to attract many audiences, given the sub-standard visual effects that they had, thereby affecting the box office collection. The post-production bill compared to the collection was quite hefty, which, in turn, proved to be a bad deal for the brand, making it yet another concern for investors who had to rethink before they decided on investing in Disney stocks.

The Ant-Man and the Wasp: Quantumania was the first release in 2023, but it failed miserably at the box office, making it difficult to cover even the pre-production and filming costs worth $193.2 million incurred by the production house. This eventual loss of the audience's trust in the brand also became one of the reasons that led to the decline in Disney's stock value.

Disney+ emerged as a breakthrough for Disney investors, which appeared to mark Disney’s better future in the streaming industry. This venture, as a result, pulled a lot of attraction, especially during the pandemic.

While the Disney+ plan worked to some extent, there was a possibility that the venture would perform poorly once the pandemic gets over. Hence, the company's corporate management planned and announced $60 billion investment in the Experiences division, but the stock price sank even more after that.

Seeing the declining prices of the stocks, investors started to sell the stock, as the plan seemed to have not aligned with their expectations of boosting the streaming services.

Below are a few major concerns of Disney's long-term investors to examine the business challenges and the factors that could have contributed to the company's falling stock prices.

#1 - Lack of Disney+ Content

The most common factor uniting investors and the end consumer regarding Disney+ is the possibility of lack of quality content relative to its charges.

While the streaming service is equipped with all the IPs held by Disney, the changing taste and preferences of consumers indicate how Disney is lagging behind its competitors – Netflix and Amazon Prime Video. The value for money for a subscription worth $10-$16 seems to be lacking for consumers.

#2 - Disney+ Price Increases

Disney+ offers subpar value for money compared to competitive streaming services. This issue was only exacerbated by the price hikes in 2023 amid declining sales figures. While the price increase was supposed to boost revenue, it witnessed a decline in the number of consumers as inflation remained a steady issue and households switched to tighter budgets. 

#3 - CEO Bob Iger

As investors witnessed the incompetence of the current Disney CEO, Bob Iger, in bringing the company back on track, it has now become difficult for them to trust the latter. The CEO will complete his tenure in December 2026, and the board of directors are yet to identify a potential successor for Iger, who has been the CEO of Disney from 2005-2020, after replacing Michael Eisner as the head of the company. Later, the board asked Iger to rejoin as the CEO in 2022 for two-year term, which extended to 2026 later.

The search for a new CEO is likely to be more challenging, thanks to the difficult circumstances Disney has been in for quite some time. The longer the search continues, the bigger the negative impact it could have on stock prices in the future.

The above reasons indicate how investors' sentiments, expectations, preferences, behavior, and trust affected the stock prices of Disney. While the revenue generated by the production house has been consistent, the loss of audiences' trust in the brand and the rising standards of competitor’s content quality have led to a continuous decline in its stock value. To be more precise, for Disney to regain its position, the CEO must frame strategies to take care of the trust issues of stakeholders so that they start investing once again. To achieve that, they must ensure quality content, maintain the same, and introduce lucrative offers for audiences to opt for them over their competitors.