Disney's New Amazon Deal: Does Ad Targeting Upgrade Justify a Buy?

Core Insights - Disney's partnership with Amazon Ads aims to enhance advertising capabilities, but investors are advised to wait before purchasing shares [2][10] - The integration allows Amazon DSP access to premium inventory across Disney's platforms, improving ad targeting and revenue optimization [3][4] - The partnership is set to launch in Q3 2025, with significant revenue contributions expected only in fiscal 2026 [5][10] Financial Performance - Disney reported a 7% increase in revenues to $23.6 billion for Q2 fiscal 2025, with adjusted earnings per share growing by 20% [6] - The Entertainment segment showed strong performance, with operating income rising 61%, driven by Direct-to-Consumer results [6] - The streaming business is moving towards profitability, with operating income reaching $336 million and a total of over 180 million subscriptions across Disney+ and Hulu [7] Market Position and Competitive Landscape - The Zacks Consensus Estimate for fiscal 2025 revenues is $94.89 billion, indicating a 3.86% year-over-year growth [8] - Disney faces significant competition in the streaming market, with rising content costs and challenges in subscription growth [11] - The company's shares have returned 6% year-to-date, outperforming the Zacks Consumer Discretionary sector [12] Valuation and Investment Outlook - Disney trades at a P/E ratio of 19.25, below the industry average of 20.26, reflecting mixed fundamentals [10][17] - The traditional linear television business is declining, with mixed results in the Linear Networks segment and a 12% decline in operating income in the Sports segment [16] - Current shareholders are advised to hold their positions, while prospective investors may consider waiting for a better entry point in fiscal 2026 [19][20]