DIS Stock is not a bargain even though it is falling
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How is waltz disney (NYSE:SAY) responding to the harsh impact of high and persistent inflation? You’ll want to know all the facts before you consider DIS stock, but you might not like the answer to this question. Potential investors should seriously consider whether Disney shares are actually good value.
The days of Disney easily beating its competition are long gone. CEO Bob Iger wants to engineer a major turnaround for Disney, but it won’t be easy. It may be too late because Disney no longer has 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, world-famous company. He’s not going bankrupt anytime soon. However, that doesn’t mean you have to go into a trade that you might end up regretting.
DIS stock is cheap for a reason
Value investors might argue that DIS stock looks like a bargain, especially as it recently edged closer to its 52-week low at $84.07. Still, it’s not a good idea to buy a stock just because it’s gone down.
Sometimes a stock is “cheap for a reason”, as they say. It’s no secret that Disney is struggling to compete in the streaming space. The company’s streaming service, Disney+, lost about 2.4 million subscribers during Disney’s first fiscal quarter.
Disney’s streaming business lost $1.5 billion in the quarter. This is more than double the loss recorded during the period of the previous year.
This poor performance undoubtedly contributed to the negative price pressure on DIS stock. So don’t assume stocks are a worthwhile buy now.
DIS Stock is not really a bargain
A simple valuation metric can help us decide if now is the right time to consider an investment in Disney. Over 12 consecutive months (MTT), Disney’s GAAP-measured price-to-earnings (P/E) ratio is 51.41x. Meanwhile, the sector median P/E ratio is much more reasonable, at 17.92x.
While the industry’s 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 reacting to Disney’s lackluster performance in the streaming business. The CEO has previously admitted that Disney’s price increases at the company’s parks might have been “a little too aggressive.”
As the the wall street journal Recently reported, Iger is hinting at price hikes for Disney’s streaming service. This appears to be a muted response to consumer struggles in a high inflation environment. Only time will tell, but Iger could be going the wrong way trying to fix Disney’s streaming issues.
It’s time to be careful
Disney is no longer the dominant force it once was. Investors in the company cannot count on easy returns in 2023. Also, some traders might be skeptical of Iger’s leadership.
DIS stock just doesn’t look like a bargain, even though it’s near a 52-week low. Remember that stocks that are falling may continue to lose value. There may be a good time to consider an investment in Disney at some point in the future, but for now, the best strategy is to err on the side of caution.
At the date of publication, Louis Navellier held a long-standing position within DIS. Louis Navellier has held (neither directly nor indirectly) any other position in the securities mentioned in this article.
The InvestorPlace research staff member primarily responsible for this article has not held (directly or indirectly) any position in the securities mentioned in this article.
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