Charlie Munger, vice chairman of Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) and right-hand man to Warren Buffett at the company, made declarations that might alarm some of Walt Disney’s (NYSE:DIS) investors. Yet, there’s no need to panic-sell DIS stock now. It could run higher during the next few years and reward loyal investors with share-price appreciation and dividend payments.
When Munger speaks, people listen because the man is a legend in the world of investing. And he’s known to speak his mind. As we’ll see, Munger’s warning about Disney’s future emphasizes the company’s challenges.
However, Disney should be able to face its challenges and continue to offer value to the company’s shareholders through 2025 at least. In the final analysis, it’s fine to heed Munger’s words but also stay invested in the House of Mouse through thick and thin.
Munger Issues a Warning to DIS Stock Investors
Brace yourself for a warning, or perhaps a rant, recently provided by Munger at a meeting. Here it is, for better or for worse:
“Practically every business that Disney has, has gotten tougher than it used to be. Again, welcome to human life. Think about Disney — once owned the world. Lion King was running a long run in the Theater District of New York. They went from triumph to triumph, marching, marching, marching. All of a sudden, practically every front, it’s more difficult. … How would you like running the sports, ESPN, now at Disney compared to its heyday? It’s going to be way harder for them.”
Indeed, it’s already “way harder” for Disney in a time of fierce streaming-market competition. The company lost around 2.4 million Disney+ subscribers during the first fiscal quarter of 2023. On the other hand, revenue for Disney’s Domestic Parks and Experiences and International Parks and Experiences segments both increased 27% year over year.
So, it’s not all bad news for Disney, even if the company isn’t “marching, marching, marching” from “triumph to triumph” anymore. The company can claim a “triumph,” however, regarding the opening weekend of the film Ant-Man and the Wasp: Quantumania. According to the Wall Street Journal, that film earned “$104 million in domestic ticket sales in its debut, making it the third-highest grossing February release ever.”
A Leaner Disney Could Thrive through 2025
Still, Munger’s points are well-taken. DIS stock fell from around $200 in 2021 to roughly $100 in early 2023. This share-price decline reflects several harsh realities facing Disney, some of which Munger articulated.
What could drive the Disney share price back to $200? The company’s roadmap to recovery will evidently be paved with cost reductions. Specifically, Disney is cutting around 7,000 job positions and targeting $5.5 billion worth of cost savings.
Moreover, CEO Bob Iger predicts that Disney+ “will hit profitability by the end of fiscal 2024.” So, apparently, the company is confident in its ability to compete successfully as a streaming business.
Additionally, Iger expects Disney to reinstate its dividend “by the end of the calendar year.” Disney’s dividend has been suspended since the spring of 2020. Its reinstatement should entice some income-focused investors, and this could have a positive impact on the Disney share price.
So, Here’s My DIS Stock Price Prediction for 2025
Munger’s warning is worth noting and contains valid points. It won’t be easy for Disney to navigate the next few years. Practically every aspect of Disney’s business will be “tougher than it used to be.”
Fair enough, but Munger isn’t necessarily telling you to avoid investing in Disney. The company is proactively addressing its financial challenges by carefully reducing Disney’s expenditures.
Plus, it’s a positive sign that Disney is bringing its dividend back. With all of that in mind, I expect DIS stock to revisit $200 in 2025. It probably won’t be a smooth ride, but Disney’s loyal shareholders should prevail over the long term, as they typically do.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.