Disney Trades at 18.41x Discounted P/E: Buy, Sell or Hold the Stock?

Valuation and Performance - Disney currently trades at a P/E ratio of 18.41x, below its five-year historical average of 20.79x and the Zacks Media Conglomerates industry average of 20.1x, presenting an intriguing opportunity for investors [1][9] - The company demonstrated resilient performance in its third-quarter fiscal 2025 results, with total segment operating income increasing 8% to $4.6 billion and adjusted earnings per share rising 16% to $1.61 [2] Financial Guidance - Management revised fiscal 2025 guidance, now targeting adjusted earnings per share of $5.85, representing 18% growth from fiscal 2024, reflecting successful execution of streaming profitability initiatives and robust theme park performance [3] - The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $94.91 billion, indicating 3.88% year-over-year growth, with earnings expected to increase 17.91% to $5.86 per share [4] Streaming Segment Growth - Disney's direct-to-consumer segment achieved operating income of $346 million in the third quarter of fiscal 2025, a significant turnaround from a loss in the prior-year period, with Disney+ adding 1.8 million subscribers, reaching a total of 128 million [5] - Management expects Disney+ and Hulu subscriptions to increase by more than 10 million in the fiscal fourth quarter, driven by an expanded distribution deal with Charter Communications [6] ESPN and Sports Segment - ESPN's new direct-to-consumer streaming service launched on August 21, 2025, priced at $29.99 monthly, marking a pivotal shift in sports media distribution [7][10] - Management anticipates the ESPN streaming service will be accretive to earnings in its first year, with improved operating income guidance reflecting strong momentum in advertising revenues and strategic content investments [11] Theme Parks Performance - Disney's experiences segment delivered 8% revenue growth to $9.1 billion in the fiscal third quarter, with domestic parks operating income rising 22% to $1.7 billion [12] - Major expansion plans include new attractions and international expansions, demonstrating commitment to long-term growth while potentially pressuring near-term margins [13] Competitive Landscape - Disney's year-to-date performance in 2025 reflects modest gains of approximately 6.7%, trailing behind competitors like Warner Bros. Discovery, Amazon, and Netflix [14] - Disney's valuation discount relative to Netflix appears justified, yet the company offers diversification advantages over Netflix's singular streaming focus [18] Investment Recommendation - Despite trading at historically discounted valuations and demonstrating operational improvements, investors are advised to maintain a hold position on Disney stock due to macroeconomic uncertainty and ongoing theme park construction disruptions [19]