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Walt Disney's (NYSE: DIS) place is in the living room. Its popular cable channels helped it establish a dominant position in the media and entertainment industry. But this part of the business faces secular decline, as U.S. households have been cutting the cord. The linear networks aren't as lucrative as they once were.
The company has transitioned successfully this decade in the streaming age. It's been a costly evolution, though. But Disney+, Hulu, and the direct-to-consumer (DTC) ESPN platform give Disney a comprehensive content offering that caters to everyone in the family.
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While changes have happened on the TV screen, the experiences segment continues to drive the lion's share of financial results. And the business is investing aggressively here.
Shareholders have witnessed multiple CEO changes, from Bob Chapek to Bob Iger to Josh D'Amaro. And the consumer discretionary stock has disappointed amid all of this turbulence. It currently trades 46% off its peak (as of Oct. 14). And it's down 4% in 2026, lagging the broader market.
There's one stat, however, that makes the House of Mouse hard to ignore in October.
Disney shares trade at a forward price-to-earnings ratio of 13.8 right now. That's significantly cheaper than the S&P 500's 19.6 multiple. It looks like a compelling bargain opportunity. That point carries extra weight when the market is near record territory. And given that it's been four years since this raging bull market started, investors might find it challenging to identify reasonably valued stocks.
As noted earlier, Disney hasn't been running a simple and easy-to-follow business. It seems that there are a lot of moving parts. And the market could be punishing the stock because of it.
The legacy cable networks continue to be a financial drag. From fiscal 2022 to fiscal 2025 (last available data), operating income fell 65%. That's not surprising because, according to eMarketer, the number of cable-TV households in the U.S. will decline again in 2026 to 54 million. That's down from 105 million households in 2010. Consumers have increasingly moved their attention to streaming entertainment, which has hurt legacy media players.
And this is a capital-intensive business. In addition to expanding its experiences division, Disney must constantly invest in content that seems to get more expensive every year. This is particularly true with valuable sports rights. Big tech enterprises have entered the arena, which can result in costly bidding wars.
Competition for eyeballs is also intense these days. And it's a crowded race to capture consumer discretionary spending. Moreover, the investment community might simply be chasing what has been the hottest trade, which is owning artificial intelligence stocks.
Knowing the negative factors, I still believe the valuation makes Disney shares too hard to ignore this month. For less than 14 times forward earnings, investors can own a stake in a high-quality company.
It all starts with something that no rival can copy, which is Disney's intellectual property (IP). Decades of characters, franchises, and stories can't be rebuilt with any amount of capital. This supports the company's economic moat.
The entertainment DTC operations, including Disney+ and Hulu (excluding live TV), have turned the corner on profitability. Operating income soared more than 100% year over year in Q3 (ended June 27) to $712 million. In fiscal 2022, it posted a sizable operating loss of $4 billion (including ESPN+). This is an emerging bottom-line tailwind.
Then there's the experience segment. The main drivers here are the theme parks and cruises, both of which are expanding as part of a 10-year, $60 billion capital expenditure cycle announced three years ago. The segment's Q3 operating income of $3 billion, accounting for 54% of the company's total, demonstrates how lucrative it is for Disney to bring its IP to life.
Patient investors with a five-year horizon have plenty to like here.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
1 Stat That Makes Walt Disney (DIS) Hard to Ignore This October was originally published by The Motley Fool
