Should You Buy the Dip in Walt Disney Co.?

NYSE: DIS | Walt Disney Co. News, Ratings, and Charts

DIS – Entertainment giant Walt Disney’s (DIS) shares have dipped in price since CEO Bob Chapek acknowledged recently that various challenges will lead to fewer new Disney+ users than expected. However, can the stock rebound by leveraging its broad portfolio of products and services? Let’s find out.

Shares of the world’s largest entertainment company, The Walt Disney Company (DIS), have gained significantly over the past few years. Its solid stock price performance can be attributed primarily to the excellent performance of the company’s direct-to-consumer business—with a total of nearly 174 million subscriptions across Disney+, ESPN+, and Hulu at the end of the third quarter—and a host of added content on each platform.

However, DIS CEO Bob Chapek recently said that the new Disney+ subscribers in the current fiscal year might be in the “low single-digit millions,” because it faces stiff competition from other players such as Netflix Inc. (NFLX) and Apple Inc. (AAPL) in the streaming space. 

The stock has declined 4.7% in price over the past six months to close Friday’s trading session at $176. In addition, it is currently trading 13.3% below its 52-week high of $203.02, which it hit on March 8, 2021. Furthermore, the rising COVID-19 cases owing to the rapid spread of the Delta coronavirus variant make the company’s near-term outlook uncertain due to capacity limitations and production delays.

Here’s what could influence DIS’ performance in the coming months:

COVID-19 Pandemic-Related Headwinds

DIS is expected to continue incurring additional costs to address government regulations and implement safety measures for their employees, talent, and guests concerning the COVID-19 measures. The timing, duration, and extent of these costs will depend on the timing and scope of their operations as they resume. The company currently expects these costs to total  approximately $1 billion in its fiscal year 2021.

Solid Financials

DIS’ revenues surged 48.7% year-over-year to $17.02 billion for its fiscal third quarter, ended July 3, 2021. In addition, its total segment operating income grew 116.7% year-over-year to $2.38 billion. The company’s free cash flow came in at $528 million, representing a 16% year-over-year increase. Also, its EPS was  $0.80, up 900% year-over-year.

Lofty Valuation

In terms of forward P/CF, DIS’ 50.96x is 393.6% higher than the 10.32x industry average. Likewise, its 70.23x forward non-GAAP P/E is 257.4% higher than the 19.65x industry average. Furthermore, the stock’s forward EV/EBITDA and P/S of 34.12x and 4.72x, respectively, are higher than the  9.96x and 1.83x  industry averages.

POWR Ratings Don’t Indicate Enough Upside

DIS has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DIS has a D grade for Value, which is in sync with its higher-than-industry valuation ratios.

The stock has a D grade for Quality. This is justified because DIS’ trailing-12-month ROCE, ROTC, and ROTA of 1.34%, 0.96%, and 0.56%, respectively, are lower than the 8.48%, 4.31%, and 2.68% industry averages.

DIS is ranked #8 of 12 stocks in the Entertainment – Broadcasters industry. Click here to access DIS’ ratings for Growth, Momentum, Stability, and Sentiment as well.

Bottom Line

Even though DIS reported impressive second-quarter earnings results, its near-term prospects seem uncertain because of the growing number of COVID-19 cases. In addition, hedge fund’s interest in the stock has declined  lately. So, the stock looks overvalued at its  current price level, and we think it could be wise to wait for a better entry point in the stock.

How Does Walt Disney (DIS) Stack Up Against its Peers?

While DIS has an overall POWR Rating of C, one might want to consider investing in the following Entertainment – Broadcasters stocks with a B (Buy) rating: Scienjoy Holding Corporation (SJ), Grupo Televisa S.A. (TV), and Nexstar Media Group, Inc. (NXST).


DIS shares were unchanged in after-hours trading Monday. Year-to-date, DIS has declined -1.61%, versus a 19.55% rise in the benchmark S&P 500 index during the same period.


About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
DISGet RatingGet RatingGet Rating
SJGet RatingGet RatingGet Rating
TVGet RatingGet RatingGet Rating
NXSTGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

2022 Stock Market Outlook

The stock market (SPY) continued on its bullish path in 2021. Will that continue in 2022? And what could happen to awaken the bear market from hibernation? 40 year investment veteran Steve Reitmeister explores this and more in his “2022 Stock Market Outlook” which includes his top 12 stocks for the year ahead. Read on for full details below...

:  |  News, Ratings, and Charts

3 Undervalued Energy Stocks to Buy as Oil Approaches $80

Given strong demand and years of underinvestment in new production, energy stocks are likely to keep outperforming in 2022. Many have very favorable valuations, and value stocks tend to outperform in environments with rising rates and growth. Therefore, investors should consider buying TransGlobe Energy (TGA), Apache (APA), and Ovintiv (OVV).

:  |  News, Ratings, and Charts

100 Best Stocks for 2022

2022 is a key year for investors. The easy money from the start of the current bull market via the S&P 500 (SPY) has already come and gone. Now gains for the average investor will slow down...but who wants to be average? The path to outperformance just became easier with our listing of the 100 best stocks for 2022. Get full details below...

:  |  News, Ratings, and Charts

3 Chip Stocks to Buy Now that Power the Metaverse

The term ‘metaverse’ is the latest tech buzzword on everyone's lips. Investors seem excited about the potential it holds, and tech giants continue to invest heavily to develop metaverse. Given this backdrop, we think it could be wise to add quality semiconductor chip stocks NVIDIA (NVDA), Intel (INTC), and Micron Technology (MU) because they are likely to play a significant role in metaverse infrastructure. Read on.

:  |  News, Ratings, and Charts

100 Best Stocks for 2022

2022 is a key year for investors. The easy money from the start of the current bull market via the S&P 500 (SPY) has already come and gone. Now gains for the average investor will slow down...but who wants to be average? The path to outperformance just became easier with our listing of the 100 best stocks for 2022. Get full details below...

Read More Stories

More Walt Disney Co. (DIS) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All DIS News