It's time to buy the House of Mouse.
There, I said it. I didn't necessarily want to say it, because to be perfectly honest, I'm not thrilled with a lot of decisions that The Walt Disney Company (DIS -0.04%) has been making these last few years. (The switch from cartoons to live-action movies, for example -- I'm an old-school, family-friendly-cartoons-watching Fool).
I also realize that this may not be a popular view. With the Dow Jones Industrial Average down "only" 18% so far this year, entertainment giant Disney's stock losses have been more than twice as harsh. Since the start of 2022, Disney stock has fallen 38%, inflicting a lot of pain for shareholders who've stuck with Disney through thick and thin.
DIS Total Return Price data by YCharts.
That being said, it's inarguable that Disney has also made a lot of smart decisions, too. The most obvious is how Disney rolled up basically every popular movie franchise on Earth (except for Shrek, perhaps) into a goliath of cinema, TV, and streaming entertainment. Whether it's Star Wars, Marvel, Pixar, Disney -- or even the Simpsons -- these days, if you want to watch any of them, you have to hand over your money to Disney+.
Disney also showed itself to be surprisingly nimble for a $170 billion company, pivoting its business model away from emphasizing in-theater entertainment and shifting its (then) still shiny and new Onward blockbuster from theaters to streaming at the start of the pandemic. Bold moves like that one, I suspect, turned Disney+ into Disney's second-biggest business by revenues in the most recent quarter, according to data from S&P Global Market Intelligence. Of course, there was the added impetus of most of America being stuck at home, streaming, for months during the COVID years.)
What comes next
And now, the pandemic is over -- in a manner of speaking. At worst, I'd say that most people have become resigned to the fact that COVID-19 is now an endemic disease that must be mitigated and can't be avoided forever.
Movie theaters are wide open once again, and Disney's latest Marvel flick, Doctor Strange in the Multiverse of Madness, is closing rapidly on $1 billion in box office sales worldwide. Summer has arrived, tourists are returning to Disney theme parks, and parks watchers report that Walt Disney World is "super crowded" -- which may not be a lot of fun from a guest's perspective, but is great news for Disney from a revenue perspective.
Why now is the time to buy
Simply put, all systems now look "green" for Disney to, in 2022, finally grow past where it was in 2019 before the pandemic struck. From $69.6 billion in 2019 revenues, analysts see Disney approaching $84.4 billion in sales this year -- then adding another $10 billion to that sum in 2023.
Granted, Disney may not look like much of a bargain right now. The stock's trailing price to earnings (P/E) is stuck at 65 -- but that valuation is based on still-pandemic-hobbled 2021 results. If you look out just a little further, Disney's P/E drops to a more palatable 20 based on analyst forecasts for $4.64 per share in earnings next year. That's cheaper than the 21 forward P/E that Disney averaged in 2019, before the pandemic hit, and before Disney+ had turned into the entertainment juggernaut it has since become.
Look even further out, and Disney enters into full-scale growth mode. Analysts see earnings surging as much as 41% or 42% annually each year for the next five years, according to S&P Global data. By 2026, Disney could be earning as much as $8.53 per share (more than four times this year's estimated earnings) on more than $114 billion in revenue. At current share prices, that would work out to a P/E ratio of just 11x that earnings forecast.
The best time to buy Disney stock, though, might be when its stock is still down 38% -- before investors realize just how profitable Disney is about to become.
