At sub-$100 per share, investors now have the potential to pick up DIS stock near its 52-week low. This dramatic downturn we’ve seen in recent days has been rather indiscriminate, with even the highest-quality blue-chip names seeing major declines. There are a number of reasons for this market weakness.
The May inflation report, which came in significantly higher than expectations and marked a new high not seen since 1981, has spooked investors today. The market is now pricing in more tightening, which should bring valuations down further. For Disney, a stock that’s not cheap but also not extremely expensive right now, it’s unclear how much of the future downside is baked in at these levels.
That said, this company-specific catalyst today is a key discussion point for investors in DIS stock. Let’s dive into some of the details of this move.
DIS Stock Sinks on Key Executive Departure
According to recent reports, Disney’s parting with Peter Rice was abrupt. So abrupt, in fact, that Rice was not aware he was going to be fired. Mr. Rice has acted in various senior executive roles, first at Fox, and then at Disney following the merger of the two companies in 2019.
In his absence, Disney has promoted Dana Walden to oversee the company’s television operations. Additionally, the company indicated support for CEO Bob Chapek and this move.
Given how abrupt this move was, it’s understandable why Disney’s stock price is moving down today. Investors want certainty, and to some degree, this firing represents uncertainty with respect to the strategic direction of the company’s television department. Many consider Disney’s media segment (ex-streaming) to be an overhang on the overall business. Perhaps this hiring is an indication that’s the case.
That said, Disney’s Parks and Entertainment division is likely to be a key growth driver over the long term. The same can be said for its streaming division. At sub-$100 per share, DIS stock is starting to look attractive. However, with a price-to-earnings ratio around 70X at the time of writing, it’s unclear just how much more downside DIS stock could have from here. Investors appear to be taking the safe route, selling equities once again on the back of what could be higher-than-expected inflation, and lower valuations, for some time.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.