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3 Reasons to Hold Disney Stock Despite 10.7% Decline in 6 Months
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Key Takeaways
DIS Experiences turns IP into immersive destinations, driving repeat visits and loyalty.
DIS streaming bundles Disney, Hulu and ESPN, boosting engagement and reducing churn across services.
DIS trades at 14.3x forward earnings, below the sector median, with double-digit EPS growth is expected.
Disney (DIS - Free Report) has experienced a 10.7% decline over the past six months, underperforming the Zacks Consumer Discretionary sector's 8% decline while the Zacks Media Conglomerates industry plunged 19.6%. Among peers, DIS lagged Amazon (AMZN - Free Report) , which shed 3%, while outpacing Netflix (NFLX - Free Report) and Paramount Skydance Corporation (PSKY - Free Report) , which plunged 19.3% and 39.8%, respectively.
This pullback has left investors questioning whether the decline reflects a structural shift or a temporary dislocation. Rising programming and production costs, execution risk surrounding an unprecedented capital expansion cycle and the ongoing challenge of scaling streaming profitability have collectively weighed on sentiment, overshadowing the progress DIS has made across its core businesses. The Experiences segment continues to post record revenue, streaming profitability is gaining traction, and a deep intellectual property pipeline continues to generate value across multiple business lines.
DIS’ Past-6-Month Performance
Image Source: Zacks Investment Research
Disney's Experiences Segment: A Structural Moat
The Experiences segment is the most tangible expression of Disney's brand power, translating decades of storytelling into physical destinations that generate recurring, high-margin revenue streams. This business is anchored in real-world consumer behavior, where guests do not just watch Disney but live it, making it one of the more resilient and differentiated assets in the media landscape. In the first quarter of fiscal 2026, the segment reported $10 billion in quarterly revenues, up 6% year over year, with domestic operating income growing 8%, attendance rising 1%, and per capita spending increasing 4%. The launch of the Disney Destiny further indicates the breadth of DIS's physical entertainment ecosystem, reinforced by a proprietary IP library spanning Marvel, Star Wars,Pixar and Disney Animation that few peers can replicate at a comparable scale.
However, Disney is currently in its most ambitious expansion phase, with the reimagined Disneyland Paris anchored by the new World of Frozen attraction and the Disney Adventure set to become the first cruise ship homeported in Asia. This expansion is backed by deep capital conviction, with segment capital expenditures reaching $2.7 billion in the first quarter of fiscal 2026 alone. While the long-term return thesis is compelling, the scale of investment also introduces execution and monetization risk, particularly as international visitation trends at domestic parks remain a near-term headwind and new properties take time to reach optimal attendance and yield levels.
Disney's streaming business is built around a differentiated content ecosystem spanning family entertainment, general entertainment and live sports, with the bundling of Disney+, Hulu and ESPN creating a multi-vertical subscription proposition that deepens engagement and measurably reduces churn. DIS is further strengthening the platform through a licensing agreement with OpenAI to deploy Sora-generated content and is working toward a fully unified app experience by the end of calendar 2026. The near-term content funnel is well stocked, with Zootopia 2, Avatar: Fire and Ash, The Mandalorian and Grogu, Toy Story 5 and Avengers: Doomsday all set to feed the streaming funnel through fiscal 2026.
In the first quarter of fiscal 2026, Entertainment Subscription Video on Demand (SVOD) operating income grew 72% year over year to $450 million, with total SVOD revenue increasing 11% to $5.3 billion. The margin base stands at 8.4%, and DIS expects to reach a 10% full-year SVOD operating margin in fiscal 2026, though rising programming and production costs, higher marketing spend and sustained international content investment remain meaningful headwinds that could test the pace of margin expansion. While Netflix and Amazon retain meaningful scale advantages and Paramount Skydance Corporation continues to struggle with its own streaming pivot, DIS' content depth and bundling architecture position it to compound profitability over the medium term, provided cost discipline remains intact.
Disney Trades at Cheap Valuations
Image Source: Zacks Investment Research
Disney shares are trading cheap as suggested by the Zacks Value Score of A. At a forward price-to-earnings multiple of 14.3x, DIS trades below the industry median of 14.86x and the broader sector median of 17x, a discount that warrants attention given the improving fundamental backdrop. For fiscal 2026, DIS expects double-digit adjusted earnings per share growth, double-digit Entertainment segment operating income growth and high single-digit Experiences segment operating income growth, with most of the upside weighted toward the second half.
The Zacks Consensus Estimate pegs fiscal 2026 revenues at $100.96 billion, implying year-over-year growth of 6.92%, while the consensus mark for EPS is pegged at $6.61, up 11.47% year over year. DIS remains on track to repurchase $7 billion of stock in fiscal 2026, further suggesting that the current valuation may not fully reflect the improving fundamental trajectory.
DIS is navigating a period of heavy capital deployment and operational transition, with rising costs and execution risk across its expansion initiatives remaining live concerns. The experiences segment's structural moat, a well-stocked content pipeline and a discounted valuation provide a reasonable basis for staying invested, though investors with a shorter horizon may prefer to wait for greater execution clarity before adding to positions. The fundamental building blocks remain intact and DIS's combination of a compounding streaming business and a physically irreplicable Experiences segment continues to distinguish it within a pressured media landscape. However, sustained competition from Netflix, Amazon and Paramount Skydance Corporation is expected to keep pressure on the business in the near term.
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Image: Bigstock
3 Reasons to Hold Disney Stock Despite 10.7% Decline in 6 Months
Key Takeaways
Disney (DIS - Free Report) has experienced a 10.7% decline over the past six months, underperforming the Zacks Consumer Discretionary sector's 8% decline while the Zacks Media Conglomerates industry plunged 19.6%. Among peers, DIS lagged Amazon (AMZN - Free Report) , which shed 3%, while outpacing Netflix (NFLX - Free Report) and Paramount Skydance Corporation (PSKY - Free Report) , which plunged 19.3% and 39.8%, respectively.
This pullback has left investors questioning whether the decline reflects a structural shift or a temporary dislocation. Rising programming and production costs, execution risk surrounding an unprecedented capital expansion cycle and the ongoing challenge of scaling streaming profitability have collectively weighed on sentiment, overshadowing the progress DIS has made across its core businesses. The Experiences segment continues to post record revenue, streaming profitability is gaining traction, and a deep intellectual property pipeline continues to generate value across multiple business lines.
DIS’ Past-6-Month Performance
Image Source: Zacks Investment Research
Disney's Experiences Segment: A Structural Moat
The Experiences segment is the most tangible expression of Disney's brand power, translating decades of storytelling into physical destinations that generate recurring, high-margin revenue streams. This business is anchored in real-world consumer behavior, where guests do not just watch Disney but live it, making it one of the more resilient and differentiated assets in the media landscape. In the first quarter of fiscal 2026, the segment reported $10 billion in quarterly revenues, up 6% year over year, with domestic operating income growing 8%, attendance rising 1%, and per capita spending increasing 4%. The launch of the Disney Destiny further indicates the breadth of DIS's physical entertainment ecosystem, reinforced by a proprietary IP library spanning Marvel, Star Wars, Pixar and Disney Animation that few peers can replicate at a comparable scale.
However, Disney is currently in its most ambitious expansion phase, with the reimagined Disneyland Paris anchored by the new World of Frozen attraction and the Disney Adventure set to become the first cruise ship homeported in Asia. This expansion is backed by deep capital conviction, with segment capital expenditures reaching $2.7 billion in the first quarter of fiscal 2026 alone. While the long-term return thesis is compelling, the scale of investment also introduces execution and monetization risk, particularly as international visitation trends at domestic parks remain a near-term headwind and new properties take time to reach optimal attendance and yield levels.
Disney's Streaming Turns Profitable, Scale Remains Key
Disney's streaming business is built around a differentiated content ecosystem spanning family entertainment, general entertainment and live sports, with the bundling of Disney+, Hulu and ESPN creating a multi-vertical subscription proposition that deepens engagement and measurably reduces churn. DIS is further strengthening the platform through a licensing agreement with OpenAI to deploy Sora-generated content and is working toward a fully unified app experience by the end of calendar 2026. The near-term content funnel is well stocked, with Zootopia 2, Avatar: Fire and Ash, The Mandalorian and Grogu, Toy Story 5 and Avengers: Doomsday all set to feed the streaming funnel through fiscal 2026.
In the first quarter of fiscal 2026, Entertainment Subscription Video on Demand (SVOD) operating income grew 72% year over year to $450 million, with total SVOD revenue increasing 11% to $5.3 billion. The margin base stands at 8.4%, and DIS expects to reach a 10% full-year SVOD operating margin in fiscal 2026, though rising programming and production costs, higher marketing spend and sustained international content investment remain meaningful headwinds that could test the pace of margin expansion. While Netflix and Amazon retain meaningful scale advantages and Paramount Skydance Corporation continues to struggle with its own streaming pivot, DIS' content depth and bundling architecture position it to compound profitability over the medium term, provided cost discipline remains intact.
Disney Trades at Cheap Valuations
Image Source: Zacks Investment Research
Disney shares are trading cheap as suggested by the Zacks Value Score of A. At a forward price-to-earnings multiple of 14.3x, DIS trades below the industry median of 14.86x and the broader sector median of 17x, a discount that warrants attention given the improving fundamental backdrop. For fiscal 2026, DIS expects double-digit adjusted earnings per share growth, double-digit Entertainment segment operating income growth and high single-digit Experiences segment operating income growth, with most of the upside weighted toward the second half.
The Zacks Consensus Estimate pegs fiscal 2026 revenues at $100.96 billion, implying year-over-year growth of 6.92%, while the consensus mark for EPS is pegged at $6.61, up 11.47% year over year. DIS remains on track to repurchase $7 billion of stock in fiscal 2026, further suggesting that the current valuation may not fully reflect the improving fundamental trajectory.
The Walt Disney Company Price and Consensus
The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote
Conclusion
DIS is navigating a period of heavy capital deployment and operational transition, with rising costs and execution risk across its expansion initiatives remaining live concerns. The experiences segment's structural moat, a well-stocked content pipeline and a discounted valuation provide a reasonable basis for staying invested, though investors with a shorter horizon may prefer to wait for greater execution clarity before adding to positions. The fundamental building blocks remain intact and DIS's combination of a compounding streaming business and a physically irreplicable Experiences segment continues to distinguish it within a pressured media landscape. However, sustained competition from Netflix, Amazon and Paramount Skydance Corporation is expected to keep pressure on the business in the near term.
DIS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.