How is Walt Disney (NYSE:DIS) responding to the harsh impact of persistently high inflation? You’ll want to know all the facts before considering DIS stock, but you might not like the answer to this question. Prospective investors should seriously consider whether Disney shares are actually a good value.
The days of Disney easily defeating its competition are long gone. CEO Bob Iger wants to stage a major turnaround for Disney, but it won’t be easy. It might be too late, as Disney doesn’t have the magic touch it once had, especially as the company struggles to compete in the streaming market.
Don’t get the wrong impression here. Disney is still a giant and world-famous company. It’s not going bankrupt anytime soon. However, this doesn’t mean you have to jump into a trade that you might end up regretting.
DIS Stock Is Cheap for a Reason
Value-focused investors might contend that DIS stock looks like a bargain, especially as it recently moved toward its 52-week low of $84.07. Yet, it’s not sensible to buy a stock just because it has declined.
Sometimes, a stock is “cheap for a reason,” as they say. It’s no secret that Disney is having trouble competing in the streaming space. The company’s streaming service, Disney+, lost around 2.4 million subscribers during Disney’s fiscal first quarter.
Disney’s streaming business lost $1.5 billion during the quarter. That’s more than twice the loss reported during the year-earlier period.
This poor performance undoubtedly contributed to the negative price pressure on DIS stock. So, don’t assume that the shares are a worthy dip-buy now.
DIS Stock Isn’t Really a Bargain
A simple valuation metric can help us decide whether it’s the right time to consider an investment in Disney. On a trailing 12-month (TTM) basis, Disney’s GAAP-measured price-to-earnings (P/E) ratio is 51.41x. Meanwhile, the sector’s median P/E ratio is much more reasonable, at 17.92x.
While the sector-median TTM price-to-sales (P/S) ratio is 1.26x, Disney’s is 2.02x. Again, there’s no bargain to be found here with DIS stock.
Investors might wonder how Iger is responding to Disney’s subpar performance in the streaming sector. The CEO already admitted that Disney’s price increases at the company’s parks might have been “a little bit too aggressive.”
As the Wall Street Journal recently reported, Iger is hinting at price hikes for Disney’s streaming service. This seems like a tone-deaf response to consumers’ struggles amid high inflation. Only time will tell, but Iger may take the wrong path in trying to fix Disney’s streaming-business problems.
It’s Time to Exercise Caution
Disney isn’t the dominant force that it once was. The company’s investors can’t count on easy returns in 2023. Besides, some traders might be skeptical of Iger’s leadership.
DIS stock just doesn’t look like a bargain even if it’s near its 52-week low. Remember, stocks that are down can continue to lose value. There may be a good time to consider an investment in Disney at some point in the future, but right now, the best strategy is to exercise caution.
On the date of publication, Louis Navellier had a long position in DIS. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.