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

Disney DIS currently presents investors with a compelling valuation question as shares trade at a price-to-earnings ratio hovering around 16.98, significantly below its historical average of 20.38 and the Zacks Media Conglomerates industry average. This attractive multiple arrives at a pivotal moment as the entertainment giant executes an ambitious transformation across its streaming, parks, and experiences divisions.

However, rather than rushing to accumulate shares, a measured approach suggests holding current positions or waiting for more favorable entry points as the company navigates near-term headwinds while positioning for long-term growth.

DIS' P/E F12M Ratio Depicts Discounted Valuation

Disney Achieves Streaming Profitability Milestone

Disney's third-quarter fiscal 2025 results, reported in August 2025, demonstrated a pivotal milestone in its direct-to-consumer transformation. The streaming segment achieved operating income of $346 million, marking a dramatic turnaround from the billion-dollar quarterly losses experienced just two years earlier. The company added 2.6 million net subscribers during the quarter to reach 183 million total Disney+ and Hulu subscriptions, with 128 million Disney+ subscribers specifically. Management raised its fiscal 2025 operating income expectation for direct-to-consumer streaming to $1.3 billion, significantly exceeding earlier projections and validating the strategic repositioning toward profitability over pure subscriber growth.

For the fourth quarter of fiscal 2025, Disney anticipated adding more than 10 million total Disney+ and Hulu subscriptions, with the majority expected from Hulu as a result of an expanded Charter Communications distribution deal. The company projected only modest Disney+ subscriber growth in the fiscal fourth quarter, reflecting both price increases implemented during the period and the end of recent promotional offers. Looking ahead to fiscal 2026, management guided toward double-digit percentage growth in Entertainment Direct-to-Consumer operating income, signaling confidence in sustainable streaming profitability as the business model matures.

The Walt Disney Company Price and Consensus

The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote

Experiences Segment Delivers Record Performance

In the fiscal third quarter, operating income for the Experiences segment surged 13% to $2.5 billion, with domestic parks and experiences leading the growth with a 22% year-over-year increase to $1.7 billion. The exceptional performance reflected strong demand for Disney's premium entertainment offerings, with bookings tracking approximately 6% higher in the early fiscal fourth quarter compared to the prior year.

Management projects high single-digit percentage growth in the Experiences segment’s operating income for fiscal 2026 and 2027.

The parks business continues to benefit from multiple expansion initiatives. In October 2025, Disney implemented comprehensive price increases across both Disney World and Disneyland, affecting park tickets, dining, parking, and annual passes. While the price hikes generated consumer backlash, management maintained that demand remained robust with no significant impact on attendance trends. The experiences segment is projected to deliver 8% segment operating income growth for fiscal 2025, providing a stable revenue base as the company navigates its streaming transition.

Disney Destiny Cruise Ship Launches in November 2025

Disney Cruise Line achieved a major milestone with the arrival of the Disney Destiny in Port Canaveral on Nov. 2, 2025, marking the company's continued expansion in the high-margin cruise business. The Disney Destiny, the seventh ship in Disney Cruise Line's fleet and the third in the Wish class, features a distinctive "Heroes and Villains" theme with Marvel-inspired venues, including a Black Panther-themed Grand Hall, a Doctor Strange-inspired entertainment parlor, and an Iron Man tower suite. With capacity for approximately 4,000 passengers across 1,258 cabins, the Disney Destiny adds substantial capacity to Disney Cruise Line's operations.

Parks Enhancements and November 2025 Transitions

Disney's theme parks underwent significant transformations during November 2025 as the holiday season commenced. The Jingle Cruise, a holiday overlay of the classic Jungle Cruise attraction, returned to Magic Kingdom on Nov. 3, 2025, featuring seasonal decorations, holiday-themed boat names, and festive jokes from the skippers.

Animal Kingdom is set to debut Zootopia: Better Zoogether! on Nov. 7, 2025, a new show that alters Lightning Lane selections at the park. Disney World's official holiday season kicks off Nov. 14, 2025, with decorations appearing throughout the theme parks, resort hotels, and Disney Springs in the preceding days.

Disney also announced that Rock 'n' Roller Coaster starring The Muppets will open in the summer of 2026 at Disney's Hollywood Studios, providing another attraction to complement the park's evolving entertainment lineup. Additionally, Disney shared that Savannah Bananas' Banana Ball is coming to Disney World in 2026 at the ESPN Wide World of Sports Complex, expanding the sports offerings at the resort. These continuous investments in new attractions and seasonal experiences underscore Disney's commitment to driving repeat visitation and maintaining pricing power in its domestic parks business.

Content Pipeline and Strategic Initiatives

ESPN launched its ESPN Unlimited direct-to-consumer sports offering on Aug. 21, 2025, with pricing starting at $11.99 per month and premium tiers available at $30 per month. The NFL took a 10% equity stake in ESPN following a strategic deal that brings additional content, including NFL Network, NFL RedZone, and NFL Fantasy assets to ESPN's platform. Additionally, ESPN secured exclusive U.S. streaming rights to WWE Premium Live Events, including WrestleMania and SummerSlam, beginning in 2026 under a five-year deal reportedly worth an average of $325 million annually. These strategic content acquisitions position ESPN's direct-to-consumer offering to compete effectively in the sports streaming market, with management projecting low single-digit operating income growth for ESPN in fiscal 2026.

Share Price Performance and Competitive Landscape

Disney shares demonstrated recent momentum, gaining approximately 9.1% in the past 6-month period as streaming profitability materialized and parks performance remained robust.

DIS' 6-Month Performance

The competitive environment remains intense, with Netflix NFLX, Amazon AMZN and Warner Bros. Discovery WBD all vying for consumer attention and advertising dollars. Netflix announced a 10-for-1 stock split and the streaming leader is actively exploring a bid for Warner Bros. Discovery's studio and streaming business, demonstrating the ongoing consolidation, pressures in the industry. Netflix's strong momentum reflects its established profitability and scale advantages that Disney is still working to match in streaming. Amazon's diversified revenue streams and substantial free cash flow generation provide competitive advantages that pure-play entertainment companies like Disney cannot match.

Investment Thesis: Strategic Hold With Selective Opportunities

Given Disney's current valuation and strategic positioning as the company prepares to report fourth-quarter fiscal 2025 results on Nov. 13, 2025, investors should consider maintaining existing positions while remaining attentive to potential entry opportunities. Disney currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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