Could Things Change Under D’Amaro?

Meanwhile, despite the visible improvement in Disney’s performance, it failed to cut ice with the markets. DIS stock soared the day taht Disney announced Iger’s appointment in November 2022, but since then, it has practically gone nowhere, underperforming the markets badly over the period.

This divergence between earnings growth and price action has meant that Disney’s valuations have plummeted over the last three years. DIS stock trades at a forward price-to-earnings (P/E) multiple of 16.4 times. That’s a discount to the average S&P 500 Index ($SPX) constituent, whereas DIS was trading at a premium a few years back.

Disney boasts some of the most iconic intellectual property (IP) in the entertainment space and is the literal “cradle to grave” business offering something for practically every age group. The business has many moving parts that gel well into the broader flywheel.

Box office success particularly creates “magic” and leads to better visibility for Disney, which in turn leads to higher attendance at the company’s theme parks and more merchandise sales. The company has a massive content library — that continues to get better with every blockbuster movie — adding to its streaming proposition. The bidding war for Warner Bros. Discovery (WBD) only underscores the importance of IP, something that Disney has in plenty. DIS stock would appear attractive considering the money that Netflix (NFLX) and Paramount Skydance (PSKY) are willing to shell out for Warner Bros. Discovery’s assets.

I continue to stay constructive on Disney despite the frustrating underperformance. However, I’ve trimmed my positions in the company — not because I find its outlook particularly dim, but because I believe the recent selloff has created opportunities in tech stocks with better risk-reward compared to Disney.

Investors should keep an eye on any strategic pivot that Disney makes under D’Amaro. The new CEO will get to lead Disney in a much better position than his predecessor, but it remains to be seen whether his leadership will produce different results for DIS stock.

On the date of publication, Mohit Oberoi had a position in: DIS, NFLX. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com