It's not easy being a Walt Disney (DIS 0.59%) shareholder these days. The stock is trading down for the third year in a row, and last week the iconic blue chip hit a fresh three-year low.
There's nothing stopping the House of Mouse from hitting a new three-year low next month, too. However, there are some reasons to approach the company's depressed share price as a buying opportunity. Let's go over some of the things that could break Disney's way in September that could get the stock moving in the right direction again.
NYSE: DIS
Key Data Points
1. Media consolidation can boost the sector
Disney shares are down 26% over the past year, but some media stocks are faring even worse. Paramount Global (PARA +0.00%) has fallen 39% in that time. AMC Networks (AMCX +2.80%) is off a brutal 57%.
The industry is clearly out of favor with investors. Companies with popular linear media networks and cable properties launched premium streaming services to woo cord-cutters, but the plan hasn't gone well. Most streaming platforms are losing a lot of money, and consolidation is inevitable. There is no reason to believe that a deal will happen in September, but with the media moguls in a funk, they're going to want to do something before they start reporting fresh financial results in late October and early November.
Investors have stayed away despite the asset sales that are coming. The fear here is that everybody is looking to sell pieces, but there aren't too many looking to buy. This is an opportunity for a company like Disney with the clout to close deals. A proven ecosystem can take big-ticket purchases and amplify their success. We've seen Disney work its magic on its Pixar, Lucasfilm, and Marvel acquisitions. It's a buyers' market right now.
Disney might very well look to shed some pieces in the process, even at fire-sale prices. This isn't a problem. Investors will get excited when they see assets getting swapped. Somebody is going to crack the code, and when that happens, the entire industry will get lifted higher.
Image source: Disney.
2. Hollywood can become Hollygood
A popular talking point this year is that Disney has lost its touch at the local multiplex. Many of its films have had disappointing theatrical releases, notably Indiana Jones and the Dial of Destiny and Haunted Mansion this summer. Despite the misses, Disney is still a leading producer of filmed content. It has 4 of this year's 10 highest-grossing releases, both domestically and worldwide.
It's true that some of what Disney hoped would be tentpole releases proved to be anything but. It doesn't mean that it can't go the other way. A Haunting in Venice comes out in mid-September. The Creator follows in the final weekend of the month. Neither film is expected to come anywhere close to $100 million in stateside box office receipts, but sleeper hits do awaken this time of year in the absence of obvious blockbusters.
There are also investor concerns about the strikes that have halted production for upcoming films and TV shows. The pipeline of fresh content will be thinning out soon, and even now the market is experiencing the limited promotional availability of striking actors. Media companies may see some near-term relief on the bottom line, but the bigger picture is the problem. The drought of content will set the recovery back. There reportedly hasn't been a lot of progress in negotiating deals to end the writers' and actors' strikes, but a resolution in September -- however unlikely -- can get investors excited about the future of media stocks again.
3. Disney can announce the return of its dividend
Disney's fiscal year ends in September. With CEO Bob Iger recently doubling his term to stay at the helm through 2026, there isn't the same kind of urgency to rush things, but Disney doesn't want to end Iger's first fiscal year back on a sour note. How about bringing back the the semiannual distributions that it suspended more than three years ago?
This isn't really going out on a limb. Disney mentioned in February -- and reiterated earlier this month -- that it plans to resume shareholder distributions this year. It did emphasize that it will be calendar 2023, and not the fiscal year. The timeline for announcing the return of payouts is likely November's earnings call. However, if declaring a dividend can help prop up a stock, why not do it in September, when it could result in a positive end to the stock chart of Iger's first fiscal year back?
The yield itself won't amount to much. The optics aren't great in returning money to investors when strikes are happening and Disney is championing its own $5.5 billion in annual cost savings plan. The good news for investors is that Disney resuming its dividend will make it available again to income investors, as well as income-producing funds. Putting the move off until November or even December doesn't make sense when the stock needs a jump-start now.
