Why Walt Disney Stock Remains Fundamentally Overvalued

Year-over-year, Walt Disney stock is down more than 24%

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Walt Disney Co (NYSE:DIS) is down 1.6% to trade at $138.70 at last check, despite announcing it will reintroduce traditional character greetings at its U.S. theme parks as soon as Monday, April 18. The security has had a rough go on the chats over the past couple of months, with the 80-day moving average guiding DIS lower, while the $129 level caught pullbacks earlier this month and back in January. Year-over-year, Walt Disney stock is down 24.8%.  

DIS 60 Day


It appears be a good time to speculate on DIS' next move with options. The stock's Schaeffer's Volatility Index (SVI) of 25% ranks in the 14th percentile of its 12-month range. In other words, options players are pricing in low volatility expectations at the moment. 

Digging deeper, the media name's trailing 12-month revenues and net income have increased 8% and 54%, respectively, since 2021. The company is also estimated to grow earnings by 29.6%, and revenues by 11.6% over the next year.

However, Walt Disney has struggled to grow on the bottom-line in recent years, experiencing back-to-back years of annual net income declines between 2018 and 2020. For 2019, it saw a 12% decrease in net income, reporting $11 billion, while in 2020 it saw $2.86 billion in net losses.

In addition, DIS holds a relatively weak balance sheet with $14.63 billion in cash, and $57.63 billion in total debt. Disney stock also offers a rich valuation, despite having high growth expectations this coming year, sitting at a forward price-earnings ratio of 33.33 and a price-sales ratio of 3.57. In other words, DIS is overvalued from a fundamental point of view.


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