Whether it is through theme parks, shows, movies, or merchandise, Walt Disney (DIS 1.09%) is a company built on experiences and memories. One particular investor's methods, which involve evaluating a company through hands-on experience, are ideally suited for a business like Disney. 

That investor, Peter Lynch, is one of the most successful mutual fund managers of all time. He achieved that success by grasping -- perhaps better than any other investor in history -- the fact that behind every stock lies a business. If you can see that business in action yourself, you can add a layer of understanding on top of fundamental analysis. So: what might it look like to apply Lynch's strategies to Disney stock? And why might this approach enhance the long-term investment thesis for the company? Let's take a look to find out. 

A rendering of Cinderella castle at Disney World.

Image source: Getty Images.

Why Disney is struggling

Disney stock is down around 50% from its all-time high. It's been on a wild ride over the past three years: it dropped to a seven-year low during the peak of the COVID-19 panic, swung up to an all-time high in March 2021, and today sits at around $108 per share. A look at the below chart shows the risk/reward back-and-forth that Disney investors have dealt with recently. 

DIS Chart

DIS data by YCharts

So why is Disney stock down in the dumps now? Well, a lot of it has to do with timing. Disney was at the top of its game in 2018 and 2019 -- smashing record sales and net income, achieving strong growth, and setting blockbuster records. Then the pandemic took the wind out of Disney's sails. More recently, Netflix'(NFLX 1.74%) subscriber loss and ensuing stock collapse have called into question the dominance of other streaming services, making investors wonder if Disney+ and others will be as successful as initially assumed. 

What's more, there are doubts about how well Disney's business will hold up during a period of prolonged inflation and a potential recession. As consumers look to cut discretionary spending, an expensive vacation to a Disney theme park sounds like one of the first things to go. It's no secret that Wall Street hates uncertainty. And, all told, there is quite a bit of uncertainty surrounding Disney right now.

A grassroots look at Disney stock

A Peter Lynch approach to a company like Walt Disney would entail hopping on subreddits and forums to get a sense of how folks feel about Disney's price hikes at its parks. Go on Meta Platforms' Facebook or Instagram and see what discussions are being had about Disney's content and parks. An investor could also go and see a Disney movie like Doctor Strange in the Multiverse of Madness or the upcoming Lightyear to see if Disney's movies live up to the hype and if others feel the same way. A dedicated investor might consider getting a free trial or subscription to Disney+. Adventurous types could even go to a Disney park. From there, an investor could cross-reference their anecdotal analysis with Disney's financial statements.

This March, I conducted this kind of anecdotal analysis and went to all four theme parks at Disney World for the first time in my life. While there, I did some frontline recon: Folks grumbled about higher prices, but most largely accepted them because Disney is improving its parks and adding new rides. All told, business was booming, and Disney's quarterly numbers backed up what I had seen myself.

For the second quarter of fiscal 2022, Disney reported $6.65 billion in parks, experiences, and products revenue and $1.76 billion in segment operating income. That is the highest second quarter revenue and operating income for that segment in Disney's history -- higher than the previous record of $6.17 billion in revenue and $1.51 billion in operating income achieved in Q2 fiscal 2019.

What's even more impressive is that Disney achieved these record Q2 results despite the omicron variant denting its domestic park's performance (especially in January). Disney also booked a $268 million loss from international parks and experiences, mainly due to closures at Shanghai Disneyland and Hong Kong Disneyland.  Once you consider those two headwinds, it makes Disney's results all the more impressive.

I also subscribe to Disney+, have watched recent blockbusters, and was both impressed with and surprised by the diversity of content, as there are a lot of options outside of kids' shows. Again, this personal experience is backed up by box office numbers. Disney's Turning Red was released in March and reached 200 million streaming hours faster than any other title in Disney+ history. Disney's latest film, Doctor Strange in the Multiverse of Madness, raked in $450 million at the global box office in its opening weekend. And according to Disney, it was its 11th best opening of all time.

A powerful brand with room to run

By experiencing Disney firsthand, you would probably never guess that the stock is down 50% from its all-time high. Granted, we could see a slowdown in Disney's business, and probably a lot of that is being priced in. But as of right now, the business seems to be doing great, and is likely to only improve from here over the long term.

Most importantly, it looks like Disney's brand is as strong as ever. Diehard Marvel and Star Wars fans seem to be very happy with Disney's commitment to expanding storylines. The launch of Avatar 2 in December could be the biggest film of the year.

Seeing Disney do well in person is a friendly reminder that the company and the stock price aren't always the same thing. For investors that think Disney+ will one day be profitable and that Disney will keep improving its parks and making quality content for decades to come, the stock seems like a great buy now.