Walt Disney (NYSE:DIS), the global entertainment giant, recently hit a 3 1/2-year low amid its struggle to navigate a series of challenges. Disney finds itself grappling with several key issues, including
- Losses in its online video ventures,
- The adverse effects of strikes involving Hollywood actors writers, and
- A fee dispute with Charter Communications, the second-largest cable company in the United States, which has left 14.7 million TV viewers without access to ESPN.
Disney’s CEO, Bob Iger, who returned for a second stint as CEO in November, has initiated a cost-cutting campaign that includes reduced expenditures and a workforce reduction of 7,000 employees, all in an effort to revitalize the company. However, despite these efforts, the company’s stock has yet to regain its footing due to declining subscribers to its Disney+ streaming service and the disruptions caused by the Hollywood strikes, which have limited the release of new content.
Even as Disney’s stock price hit a 3-1/2 year low, some analysts remain cautious about recommending the stock. Laffler Tengler remarked, “We are hesitant to recommend it for the short term, and we’re uncertain about its long-term prospects.”
Since reaching an all-time high in 2021, Disney’s market value has declined by approximately $219 billion, with a nearly -7% decline in its stock price this year. It is currently trading at a below-average valuation of 17 times projected earnings for the next 12 months, down from its peak of 77 times in late 2020 when the company’s streaming business thrived amid low-interest rates and the pandemic, propelling the stock. In contrast, Netflix (NASDAQ:NFLX) has seen a 51% surge in its stock price this year and trades at around 31 times forward earnings.
The longer the Hollywood actors and writers strike persists, the more significant the impact on Disney’s financial performance. Warner Bros Discovery recently lowered its full-year adjusted EBITDA forecast, citing an expected negative impact on revenue of up to $500 million due to the strikes. Consequently, some wealth management firms are growing apprehensive about holding Disney stock. Gerber Kawasaki, a wealth management firm, expressed increasing concern about its entertainment investments in light of the ongoing strikes.
Should Walt Disney decide to divest its ESPN network, it could provide a much-needed boost to the company. According to Keybanc Capital Markets, the ESPN sports network could be valued at as much as $30 billion, while Wedbush places its potential price tag at over $50 billion. Gerber Kawasaki believes that selling ESPN “would be a strategic move for Disney to capitalize on the asset because, clearly, Disney’s value as separate entities may exceed its value as a whole at present.”
Featured Image: Unsplash
Author Faith Yakubu 
