Disney Investors Are Looking for More Than Just Streaming Growth. Keep an Eye on Cruises.

Disney’s capital expenditures rose in the latest fiscal year primarily due to higher spending on cruise ship fleet expansion. (Ty Wright/Bloomberg)

Key Points

• Disney is expanding its cruise line with new ships, including the Treasure, Destiny, and Adventure, launching between last year and March.
• Capital expenditures for the fiscal year increased to $8 billion from $5.4 billion, primarily due to cruise ship fleet expansion.
• Seaport analyst David Joyce projects the new ships could add over $2.8 billion in revenue and over $500 million in operating income for Disney in fiscal 2026.

Walt Disney is investing in more than just streaming, and Wall Street is keeping a close eye on the cruise segment at the House of Mouse.

Disney is known for some of the world’s most recognizable film franchises, a large television presence, and its massive global theme park ownership. The company also has a presence at sea through its cruise line, and has recently been investing to expand that segment.

Disney launched the Treasure ship last year, and the newest Destiny ship launches this week. The Disney Adventure is expected to set sail in Asia in March.

“Aside from the streaming business, a focal point for Disney investors over the next year is the cruiseline business,” Seaport analyst David Joyce wrote in a research note Tuesday. He added that the new ships could add over $2.8 billion of revenue and over $500 million of segment operating income for Disney in fiscal 2026.

Joyce rates Disney as a Buy with a $130 price target.

This hasn’t been a cheap endeavor. Disney said when reporting fourth-quarter earnings on Nov. 13 that capital expenditures for the fiscal year increased to $8 billion from $5.4 billion, due primarily to higher spending on cruise ship fleet expansion.

“We’ve made big investments in cruise and we’re expecting cruise to be a meaningful contributor to growth of experiences during the course of the year, particularly in the second half as we get past the launch costs and some of the dry docks that we have in the first half of the year,” CFO Hugh Johnston said on the earnings call.

This expansion comes as some on Wall Street are concerned about Disney’s theme park demand. Competition is getting tougher, specifically after Comcast opened Universal’s Epic Universe in Orlando this year. Demand is also a worry as inflation continues to pinch consumer’s pockets.

Disney said on its earnings call Nov. 13 that park demand “basically came in line with our expectations.” However, management also said that cruise demand has been “very, very strong, despite the fact that we’ve added as much capacity as we have.”

Disney is expanding its cruise ship line while also growing investments in its direct-to-consumer business as customers cut the cord on traditional TV, and box-office sales drop. Its streaming platform Disney+ added 3.8 million subscribers over the quarter, more than Wall Street’s expectations of 2.2 million additions.

Shares of Disney were up 0.7% to $106.41 on Tuesday. The stock has dropped 4.4% this year.

Write to Angela Palumbo at angela.palumbo@dowjones.com