After pulling the plug on Tesla (TSLA) last week due to a swifter-than-expected recovery in the stock that rendered its valuation too lofty for this value investor, I've redeployed that capital into a much different situation. This is one is a bit better aligned with my value inclinations, but don't get me wrong -- if Tesla gets cheap enough (which is truly in the eye of the beholder), I'll be back in it.
Walt Disney Co. (DIS) has been on my watchlist for quite a while. Just a year ago, when Disney shares were trading in the $102 range, I passed because I was not sure the worst was over and its valuation still looked a bit rich for a company that was struggling and had made some missteps. Disney was a $200 stock in March 2021 and it sometimes is easy to use a big drop in price alone as a basis for purchase, but that rarely, if ever, is a good idea. Not surprisingly, Disney shares continued to take a beating, all the way down to $84 at the end of 2022.
A rebound to $110 in February of this year did not hold, and Disney shares closed at $88.95 on Thursday. Year to date, Disney is up a mere 2% and it trades at the same level it did back in late 2014, and not all that far from its pandemic closing low of $85.76 (March 23, 2020). Let that sink in for a minute. Disney shares actually traded at substantially higher levels than now for most of the pandemic. That shows just how much disdain investors have for this stock, and that's not without reason. Disney has much to prove.
I became comfortable paying about 17x and 14x 2024 and 2025 consensus earnings estimates respectively, and took a position earlier this week at a price on par with Thursday's closing price. Just as with Tesla, I do not expect a quick recovery for Disney shares. I do plan on visiting my investment this fall, likely with thousands upon thousands of others at the parks.
One interesting note for perspective: Tesla's market cap at $816 billion is five times that of Disney ($163 billion).