There isn't a lot of love for Walt Disney (DIS +2.30%) as an investment these days, making this weekend's cover story in Barron's all the more interesting. "Reclaiming the magic," teases the weekly financial publication. It goes on to spell out why now might be a great time to play the contrarian and pick up shares of the out-of-favor entertainment giant.
The argument is sound. Disney is trading for just 17x next fiscal year's projected earnings, and that's with the bottom line being dragged down by the ongoing losses in streaming.
There are plenty of catalysts collecting cobwebs. It has iconic media assets it can sell. There's a recent wave of box-office disappointments to turn around.
The potential of digital advertising isn't offsetting the perpetual slide in linear TV spots. CEO Bob Iger just pushed out his re-retirement from Disney for another two years, giving him until 2026 to get dusting.
The bullish case makes sense but it's not being heard. The upside is there if Disney can find a way to prove the naysayers wrong.
NYSE: DIS
Key Data Points
The haunted stanchion
The Barron's piece comes at a lousy time. Disney's Haunted Mansion became the latest dud to hit the silver screen, scaring up just $24 million in ticket sales domestically in its debut weekend. It will be the latest Disney film that the House of Mouse will inevitably take a charge for by the time the multiplex receipts run dry.
Disney isn't moving in sync with the market -- the stock has fallen for four consecutive weeks. It's down in 10 of the past 13 weeks. The market has moved higher in 9 of the past 11 weeks, rising for the last three weeks.
It's not just Disney. If you channel surf through networks and streaming services, you'll see a hit parade of market losers, most of them down by a lot more than Disney stock's 17% slide over the past year. Comcast (CMCSA +0.95%) is the only one hitting new 52-week highs lately, largely because its biggest business is the steady gig of providing connectivity to the masses.
Image source: Disney.
There is room for improvement at Disney. Iger has a punch list that has only gotten longer since he arrived in November. He already had his hands full trying to turn its studio business into a consistent hit factory, again. The job got a lot harder with actor and writer strikes halting production.
Investors are worried about what Disney World's response will be to Comcast opening Epic Universe just 16 miles from the Magic Kingdom's turnstiles in 2025. The near-term concern is a summertime swoon that has dented the Central Florida travel market. Disney had problems before, and now they have become bigger problems.
Some things have gotten better at Disney since Iger's return. The market isn't reacting to the positive news. The media stock is trading lower since announcing plans to trim $5.5 billion in annualized overhead. Half of the country's highest-grossing theatrical releases since Iger came back have been Disney's handiwork. Its theme-parks segment is generating record results on both ends of the income statement.
There are reasons to be optimistic. Disney will have a chance to paint a rosy picture when it reports fiscal third-quarter results next week. The magic isn't gone just because most investors aren't seeing it.
