The last time I was at Disney World was just over a year ago; the pandemic was a bigger issue than it is now (let's hope it stays that way), but folks were out in droves enjoying the parks. While there were limitations on attendance in the parks, it seemed as though life was back to normal and that Disney magic lived on.
There certainly has been no magic for Walt Disney (DIS) stock, though. I hadn't reviewed it for quite a while and was surprised to see it is languishing not all that far from its pandemic low. Disney is down 39% year to date, 45% over the past year and 13% over the past five years. Last week it hit a 52-week low and trades at the same level as 2015.
That was enough to have this value investor (aka dumpster diver) take a deeper look. While I spend a lot of time on smaller, more off-the wall names, I like a potential large-cap bargain as much as the next investor.
Disney currently trades at about 24x 2022 earnings estimates (its fiscal year ends in September, so two quarters are already in the books); that's not exactly cheap in this environment, and certainly not an eye catcher. However, moving forward to 2023 and 2024, forward price-to-earnings ratios are 17 and 14.5, respectively. If you go out to 2025, the forward P/E falls to 12.5, although that's with significantly fewer analysts weighing in than the two dozen plus that currently cover the stock. (One caution on forward earnings estimates -- they are subject to downward revisions.)
The thing that could weigh further on the stock beyond the general market downtrend -- DIS is down twice as much as the S&P 500 year to date -- is the plight of the consumer in what looks like a recessionary environment. A slowdown in spending means fewer trips to Disney parks, lower levels of advertising for its television operations and fewer consumers willing to pay up for the extras (Disney announced a 43% increase in the cost of ESPN+ on Friday).
Forget the dividend; Disney, which has long been a poster child for dividend reinvestment plans, has not paid one since late 2019, a victim of the pandemic. I'm not sure it will be re-initiated anytime soon.
I am intrigued by Disney at these levels as a longer-term buy and hold but will be selective. And if I do end up establishing a position, it will be done over time. There's no hurry here. In this market, shares could get beaten up further, Friday's 4% rise in DIS notwithstanding.
