Does Disney Have Value at 9-Year Low?

The Walt Disney Co (

DIS, Financial) is nearly 30% down in the past year, with several issues keep on pressuring the company, including a Q3 earnings report that revealed fewer Disney+ subscribers amid escalating competition.

The Walt Disney Co (

DIS, Financial) has captivated hearts and ignited imaginations for decades and has always been synonymous with magic, storytelling, and innovation. However, even the most iconic brands sometimes find themselves at a crossroads, seeking to rekindle their brilliance and recapture the enchantment that once defined them.

As the curtain rises on this transformative chapter in The Walt Disney Co (

DIS, Financial)’s history, investors have a unique opportunity to be part of a narrative that could rewrite the future of entertainment.

Q3 2023 Report: A Tale of Revenue Growth, Restructuring, and Creative Rebirth

The most recent earnings release conveyed inconsistent signals throughout. Specifically, The Walt Disney Co (

DIS, Financial)’s third-quarter financial report for fiscal 2023 showed a 4% increase in revenue to $22.3 billion. In stark contrast to the $0.77 in earnings from the same quarter last year, the company recorded a loss of $0.25 per share from continuing operations. Adjusted earnings per share were $1.03, a small 5.5% decrease from the prior year.

Disney+ subscribers fell, while the direct-to-consumer (DTC) sector increased revenue and cut operating losses. Utilizing well-known brands and franchises, investigating a seamless one-app experience, and considering options like sending ESPN’s primary channels straight to customers are all part of the strategy.

Strategic Goals and Reorganization

Restoring creativity, being cost-effective, and meeting evolving expectations are the main goals of the plan. The business also places a focus on profitability in its streaming division with the launch of Disney+, which is ad-supported, and bundled subscription choices.

The reorganization strategy implemented by The Walt Disney Co (

DIS, Financial) over the past eight months under the direction of CEO Bob Iger strives to solve issues brought on by shifting customer tastes and market dynamics.

Nevertheless, The Walt Disney Co (

DIS, Financial) is well-positioned for long-term success in the entertainment industry thanks to its tenacity in the parks, experiences, and products area and dedication to innovation.

Why The Walt Disney Co (DIS, Financial) Could Be An Interesting Turnaround Case

The Walt Disney Co (DIS) can be considered a turnaround stock due to several factors:

1. Disney+ Turnaround: Despite facing losses initially to establish Disney+, the direct-to-consumer segment’s operating loss has narrowed significantly. The company anticipates the segment’s profitability by the end of the following year. Cost controls and price increases for streaming services indicate a positive trajectory.
2. Resilience in Movie Studios: The Walt Disney Co (DIS, Financial) remains dominant in the film industry, with several high-grossing films in 2023. Its global appeal has enabled movies like Elemental to thrive internationally despite modest U.S. box office performance.
3. CEO’s Extended Tenure: The contract extension for CEO Bob Iger provides a more extended timeframe for executing the turnaround strategy. This allows for better asset management, long-term improvements, and succession planning.
4. Thriving Theme Parks: Despite challenges posed by the pandemic, The Walt Disney Co (DIS)’s theme parks business continues to excel. Revenue and operating income remain significantly higher than pre-pandemic levels. Expansions in international resorts further contribute to growth prospects.
5. Attractive Valuation: The Walt Disney Co (DIS)’s stock is trading at historically low valuations. The projected earnings multiple for the upcoming fiscal year is only 17 times, which drops to just 10 for fiscal 2027. The increasing streaming service prices align with industry trends and signal improved profitability.
6. Industry Recovery: The transition from traditional media to streaming has impacted the industry, making media stocks less attractive. However, The Walt Disney Co (DIS)’s strategic price increases and market leadership position it well for a potential recovery.
7. Historic Premium: The Walt Disney Co (DIS) has historically commanded a market premium, and its current lower valuation could offer an opportunity for investors seeking a turnaround play. The company’s reputation and potential for profit growth contribute to its appeal.

While challenges remain, these factors suggest that The Walt Disney Co (DIS)’s strategic initiatives and growth potential could position it as a turnaround stock with future upside potential.

Unveiling The Walt Disney Co (DIS, Financial)’s Stock Valuation Amidst Triumphs and Trials

The Walt Disney Co (DIS)’s stock valuation presents a complex picture marked by both positive strengths and challenges. On the positive side, The Walt Disney Co (DIS) boasts a powerful position in the entertainment industry with a unique combination of assets including theme parks, film studios, a vast content library, and a rapidly growing streaming business.

While The Walt Disney Co (

DIS, Financial)’s stock has faced significant declines, it remains a dominant force in the media and entertainment industry. Most of the difficulties it faces are shared by its competitors, suggesting that these issues are industry-wide rather than exclusive to The Walt Disney Co (DIS). The potential for The Walt Disney Co (DIS) to reestablish itself as a growth-focused company and a top blue chip stock is a realistic prospect, though it may take a few years to fully materialize.

Investment Opportunities and Valuation

Given its historical strengths and long-term opportunities, the current valuation of The Walt Disney Co (

DIS, Financial)’s stock, trading at 22.4x times forward earnings, could be an attractive entry point for long-term investors who believe in its ability to rebound over time.

Favorably, DIS is currently trading at a significant discount to its intrinsic value of $160.56, and with a current price of $82.47 is well below the analyst’s target price of $109.38, indicating potential upside for investors. The P/E ratio of 67.05 suggests that the stock may be overvalued compared to its earnings, but the P/S ratio of 1.72.

Takeaway

Amid challenges, The Walt Disney Co (

DIS, Financial)’s strength in parks, experiences, and innovation persists. Turnaround factors include Disney+’s narrowing losses, movie industry dominance, extended CEO tenure, thriving theme parks, attractive valuation, and industry recovery potential.

The road to recovery is not without challenges, as evidenced by the recent box office and streaming setbacks. Ultimately, The Walt Disney Co (

DIS, Financial)’s ability to communicate and execute its turnaround strategy, as well as navigate the evolving entertainment landscape, will play a critical role in determining its future trajectory.