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Walt Disney (NYSE, DIS), Has The Decline Provided An Opportunity?

  • Walt Disney Stock analysis showing fundamentally good value in accordance with DCF valuations

  • Technical Analysis show us sitting on crucial supply zone with RSI divergence

 

The Walt Disney Company, a vast entertainment conglomerate established back in 1923, has made a big name for itself in the world of stories, creativity, and imagination. What began as a small animation studio has transformed into a media giant that covers movies, TV, theme parks, streaming services, and all sorts of things people can buy. Their famous characters, ageless tales, and immersive experiences have kept people of all ages hooked for years.


Walt Disney World, Orlando, Florida

Walt Disney value investment

When folks think about investing in Disney, they're wondering if the company's impressive past means it's a good investment choice. Disney's history is loaded with big accomplishments and long-lasting triumphs, and it's clearly a big player in the entertainment world.


But here's the real question: does Disney's glorious past mean it's going to be a money-maker in the future? To decide that, investors need to check out how well Disney's been doing financially, how it's adjusting to changing audience tastes, and how it's using new technology, especially streaming services. By looking at all this stuff, we can figure out if Disney's awesome history matches up with its potential to give its shareholders good stuff in the coming years.



Fundamentals for Disney (DIS)


In the past 12 months, Disney has significantly underperformed the broader market, having dropped 26% vs the market return of 6%.

As per the PE ratio of 67.7x, DIS appears very expensive in comparison to its peers (Warner Bros, Netflix) in the entertainment industry with an average of just 20.6x, however interestingly the Price to book is a mere 1.6x which is far less than some the same peers.


Furthermore, and perhaps the most interesting, when we consider future growth via cash flow models (DCF), the current share price of $83 is some 58% undervalued meaning there is more than enough room to see a 100% rise in the share price, and still be in line with book valuations.


This is perhaps due to the staggering 38% growth rate DIS are aiming to achieve sending their future valuations much higher. Its a huge claim considering their track record of growth rates in previous years, declining at a rate of 37% annually.


RISK: Debt levels are slightly concerning for the stock, adding risk to long term investments. With a debt to EBITDA ratio of 3.0, its on the higher side of a shareholders preference.


Technically


Currently we are trading nearly 60% off the highs of March 2021 and are running into crucial supply zone. We have spent sometime griding lower with little momentum however as per the weekly MACD and RSI, we can see the indicators showing bullish divergence suggesting some underlying strength that is yet to come into fruition.


DIS weekly (200Ma, MACD, RSI)

Technical Analysis for walt disney


Strategy


  • Hold core long positions and considering adding with stop losses in place some 20% below current market prices.

  • Leveraged positions should consider tighter stop losses in the event the supply zone does not hold, and remains below for 2 consecutive days, that would the signal needed to confirm the bearish bias will continue.


Trade Safe







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