Disney (NYSE:DIS) might be famous for providing family-friendly fun, but owning DIS stock over the past two years surely hasn’t been much fun. Before you go bargain hunting, be sure to get the lowdown on Disney’s executive-level drama. Then, you’ll probably choose to park your investable capital elsewhere for the time being.
Don’t get the wrong idea. There may be a better time to buy Disney stock. For now, however, there’s too much uncertainty about the future to maintain a prudent share position in Disney.
Is DIS Stock Really a Bargain?
Sure, Disney stock is down considerably since 2021 and has chopped around in 2023. Yet, this doesn’t mean Disney is undervalued.
Here’s a fact that might shock you. On a trailing 12-month basis, Disney’s GAAP-measured price-to-earnings ratio is 71.83x. For comparison, the sector median P/E ratio is 17.55x.
Disney’s sales aren’t growing quickly. In the quarter that ended Sept. 30, Disney’s revenue only grew 5% year over year and fell short of the analysts’ consensus estimate.
Can Disney improve and evolve? It won’t be easy, as CEO Bob Iger Disney recently acknowledged the company’s challenges. Also, Iger seeks to build the “modern version of the Walt Disney Company” during the next year, but it’s not exactly clear how the CEO plans to achieve this.
Iger is already planning his departure as Disney’s chief executive. He reportedly expects to step down in 2026, so forward-looking investors might end up focusing more on Iger’s successor than on Disney’s near-term plans under Iger.
C-Suite Battle Adds Risk to Disney Stock
On top of the CEO transition that will take place in 2026, DIS stock investors also have to contend with a battle that’s in progress among Disney’s higher-ups. Reportedly, activist investor Nelson Peltz and his company, Trian Fund Management, are moving forward with a proxy fight involving Disney’s board of directors.
Peltz and Trian evidently want at least three seats on Disney’s board. Trian criticized Disney, asserting, “Investor confidence is low, key strategic questions loom, and even Disney’s CEO is acknowledging that the company’s challenges are greater than previously believed.”
Disney’s official response to Peltz and Train wasn’t really much of a response at all. The company didn’t seem to provide a clear message on the matter, though Disney did “refresh” its board recently with the appointments of Morgan Stanley (NYSE:MS) Chairman and CEO James P. Gorman and media executive Jeremy Darroch.
It’s all very confusing, and the outcome is far from clear at this point. Peltz seems intent on taking the Disney board battle to the shareholders. This makes the path forward even less certain. Perhaps it’s best for prospective Disney stock investors to just stay on the sidelines.
DIS Stock: The Best Solution Is to Bypass the Confusion
There’s a lot happening at Disney, but it’s not necessarily positive for the company or the shareholders. Frankly, it makes sense to bypass the drama and confusion by simply avoiding Disney stock.
It might be fine to buy DIS stock when the dust settles. Then, feel free to circle back and re-assess Disney’s problems, opportunities and potential value to the shareholders.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
