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Disney: Opportunity On The Sell-Off

L&F Capital Management profile picture
L&F Capital Management


  • DIS stock is down 7% over the past month.
  • The valuation is nearing a cyclical low.
  • ESPN concerns are greatly exaggerated, as enhanced OTT distribution later this year will help turn this business unit around.
  • We are buyers of DIS stock at these levels.

While the broader markets have roared higher, Disney (NYSE:DIS) stock has been left out of the party. Over the past 3 months, the S&P 500 is more than 4% higher, while DIS stock is down about 7%. We have been bullish on DIS stock for multiple reasons, including significant forthcoming studio tailwinds, new theme park additions, and enhanced OTT distribution of ESPN and other Disney-owned content. As such, we believe this dip is a good buying opportunity.

ChartDIS data by YCharts

DIS stock has all the features we like about a potential "buy the dip" stock. Firstly, the valuation is cyclical. The stock's P/E multiple has cycled between ~16x and ~25x over the past 5 years. Secondly, the current valuation (18.3x trailing earnings) is a relative trough in that cycle. As can be seen in the chart below, such valuation troughs have historically been good buying opportunities with big near-term upside.

ChartDIS data by YCharts

Thirdly, the fundamental growth story at DIS remains in-tact and the company appears positioned to sustain strong top and bottom line growth over the next several years.

Disney is dominating in Hollywood. We have noted for some time that Disney appears to be the only studio consistently producing good movies, and this trend has only continued. Disney pulled in $1.8 billion in studio EBITDA last year versus about $1 billion for the rest of the industry combined. In Beauty & The Beast and Guardians of the Galaxy Vol. 2, Disney has the two highest grossing movies so far this year.

For Disney, quality studio content is much more than just quality studio content. Owning quality studio content has collateral benefits in the company's other operating segments, like theme park attendance and sales of consumer goods. New and forthcoming additions to Disney's theme parks, including Star Wars Land and Avatar Land, underscore

This article was written by

L&F Capital Management profile picture
L&F Capital Management, LLC, is a quantitative investment management group located in San Diego, California. Our multi-strategy investment approach comprises a mix of event-driven trades and long-term value investments, utilized together to maximize profit in both short and long term scenarios. We maintain consistency in portfolio mix through our long-term value holdings, but stress flexibility in portfolio mix from our daily event-driven trades. We believe this mix of flexibility and value generates both short and long term profits while reducing exposure to market volatility. L&F also shares various trade and investment opportunities through Seeking Alpha. For more information, visit www.lfcapitalmanagement.com.

Analyst’s Disclosure: I am/we are long DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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