Is Disney Fairly Priced After Recent Streaming Moves and Share Price Drop?

• Ever wondered if Walt Disney is actually worth its ticket price on the stock market? Let's take a closer look at whether all the magic is already reflected in the share price, or if there is still some value behind the curtain.
• Walt Disney's stock has experienced some volatility recently, dropping 7.9% over the past month and remaining down 6.7% year-to-date, with one-year returns at -11.3%.
• Recent headlines have focused on Disney's bold moves in streaming and its new partnerships with innovative content creators. These developments have kept investors and fans talking. These updates follow management changes and strategic shifts, giving the share price a lot to react to.
• On a scale of 1 to 6, Disney scores a solid 5 out of 6 on our key valuation checks. This suggests strong underappreciation in several areas. We will break down how analysts approach valuing Disney, and at the end, I will share a smarter, holistic way to look at the company's fair value.

Find out why Walt Disney's -11.3% return over the last year is lagging behind its peers.

Approach 1: Walt Disney Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s fair value by projecting its future cash flows and discounting them back to the present using an appropriate rate. For Walt Disney, this involves examining its Free Cash Flow (FCF), both today and in the years ahead.

Currently, Disney generates $11.78 Billion in Free Cash Flow. Analyst estimates project growth, with FCF expected to rise steadily over time. By 2030, Disney’s FCF is forecast to reach $13.27 Billion. While analyst projections cover the next five years, further growth estimates up to ten years are extrapolated for this model.

Based on these projections, the DCF model calculates an intrinsic fair value of $105.46 per share for Walt Disney. With the model pointing to the stock being just 1.9% below this estimated value, the share price and its fundamentals are closely aligned.

Result: ABOUT RIGHT

Walt Disney is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Walt Disney.

Approach 2: Walt Disney Price vs Earnings

When valuing profitable companies like Walt Disney, the Price-to-Earnings (PE) ratio is a reliable way to gauge if the stock’s current share price reflects its true business performance. The PE ratio is favored by investors because it connects a company’s market price directly to its actual earnings, making it easier to spot value or excess hype among established businesses.

Growth expectations and company-specific risks play a major role in determining what constitutes a “normal” or “fair” PE ratio. Rapidly growing companies or those with minimal risks tend to earn higher PE multiples. In contrast, slow growth or higher uncertainty usually leads to lower ratios.

Currently, Disney trades at a PE ratio of 14.89x. For context, the average PE for the Entertainment industry stands at 20.76x, while peer companies are priced at an even steeper average of 64.44x. At first glance, this might make Disney look inexpensive, but simple comparisons can miss important details such as differences in growth prospects or risk between companies.

The “Fair Ratio,” calculated by Simply Wall St, addresses this issue. The Fair Ratio (24.66x for Disney) is customized for the company’s unique profile, blending factors like earnings growth, profit margins, market size, business risks, and sector fundamentals. This proprietary metric provides a more balanced view than simply using peer or industry averages.

Comparing Disney’s actual PE ratio of 14.89x against its Fair Ratio of 24.66x, the shares appear significantly less expensive than what might be expected for a business of its caliber and future prospects.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Walt Disney Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your way of connecting the dots behind Disney’s numbers by forming the story you believe about where the company is headed and why. On Simply Wall St’s Community page, millions of investors use Narratives to document their personal take on Disney’s business and to map out future estimates for revenue, earnings, profit margins, and in turn, a fair value.

Narratives help make investing more accessible by allowing you to build a financial forecast based on your unique view of Disney's prospects, with the platform linking your story directly to a dynamic fair value calculation. As fresh news or earnings data becomes available, these Narratives update automatically, making it easy to compare your fair value against the latest share price and decide if it is time to buy or sell.

For example, some investors see Disney’s exclusive NFL streaming deals and strong performance in its parks as reason for optimism, projecting a fair value as high as $192 per share, while others take a more cautious approach, highlighting cost pressures and setting their expectations closer to $79. Whichever way you lean, Narratives invite you to turn your viewpoint into a clear, actionable investment plan.

Do you think there's more to the story for Walt Disney? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com