Media giant Walt Disney (NYSE:DIS) appears to be back on the upswing after struggling with poor investor sentiment and a high degree of uncertainty over the past three years. However, even though Disney stock is approaching its highest share price so far this year, the firm looks likely to continue delivering to its shareholders over the longer term, making it worth buying now. 

The Trouble With Disney

Issues for Disney started back in 2015 when investors started to worry about the impact of cord cutting on the firm’s media arm. Those concerns weren’t unfounded either; Disney has been losing subscribers each year which has been a drag on both sentiment and revenue for the media unit. 

Now, as Disney gears up to roll out its own subscription channels, including a beefed up ESPN subscription and new Hulu bundles, many are worried that the company won’t be able to compete against the likes of Netflix (NASDAQ:NFLX).

You can’t argue with Netflix’s dominance in the streaming space right now, but I think there’s room for both companies to succeed in streaming and Disney appears to have what it takes to be a leader in subscription-based entertainment.

Not only does Disney have access to a huge library of existing content that will attract subscribers to its channels, but the firm’s major franchises provide a valuable jumping-off point for new series. 

Hulu Losses and Disney Stock

Now that Disney is slated to takeover a majority share in Hulu, another concern has been the massive losses that Hulu has been posting as it works to gain subscribers and create engaging content.

Some estimate that Disney will lose some $1 billion once the firm completes its 21st Century Fox (NASDAQ:FOXA) acquisition and takes control of the service. 

Again, that’s not unfounded and could very well be true. Hulu is racking up losses quarter after quarter and Disney will have to swallow those losses.

However, they’re not for nothing. Hulu is investing in content and marketing, two things that are essential if the service wants to compete with Netflix. The investments appear to be paying off as well. Hulu added 3 million new subscribers during the 5 months between January and May.

A Bright Future for Disney Stock

The Hulu losses now are necessary in order to build the service’s position in the future, so long term investors shouldn’t worry too much. Plus, once Disney gains majority control of Hulu, the firm will have the ability to create more valuable membership bundles that include Disney content, which will make the service even more attractive.

It’s also important to note that Disney’s media arm isn’t the end-all be-all for the firm. Don’t forget that Disney has been churning out hits at the box office for decades which have in turn created a massive theme park empire and a wide range of consumer products.

That success at Disney’s studio arm is a huge part of the stock’s overall value proposition and that doesn’t appear to be slowing at all.

Even though Disney’s most recent earnings report came in below expectations, studio revenue was up a whopping 20%, proving that Disney still has what it takes to churn out blockbuster films.

The Bottom Line on Disney Stock

Disney stock has been stuck under a gloomy cloud for the past few years, but it appears that investors are starting to give the Mouse a bit of a break. While its media segment is admittedly struggling, the firm is taking the necessary steps to set its streaming service up for success in the future.

Long term investors who are patient and willing to wait out a few bumps in the road will be rewarded once the company gains some momentum in the space.

Aside from that, investors would be remiss to overlook the value in Disney’s studio arm. Success in that part of the business trickles down to the company’s theme parks and consumer products arms, so improvements on that side of the business should be celebrated.

While Disney stock doesn’t pay a particularly impressive dividend, the firm’s financial stability and impressive free-cash-flow growth over the past year suggest we might see some dividend hikes in the months to come.

As of this writing, Laura Hoy was long NFLX.