Is Disney a Buy right now?

With the stock testing multi-year lows right now, investors who in the past may have been afraid to climb aboard a name like Walt Disney (Walt Disney Stock Quote, Charts, News, Analysts, Financials NYSE:DIS) must be thinking now’s the time to book your ticket and spend some time with Mickey & Friends. But overall growth for the company could take a while, says portfolio manager Paul Harris, who thinks a recovery in Disney’s amusement park segment is looking like it could take longer than previously thought.

“You have to remember that 41 per cent of Disney’s revenue actually comes from the parks. People think it’s all about the movies and so on, but the parks business has to be running on all cylinders and I don’t think it’s fully there yet,” said Harris, partner at Harris Douglas Asset Management, who spoke on BNN Bloomberg on Thursday.

Disney took a bit of a tumble when it released its fiscal fourth quarter earnings last week, with revenue up nine per cent year-over-year to $20.15 billion, significantly lower than the consensus forecast at $21.24 billion. EPS was also a miss at $0.30 per share compared to the $0.55 expected by analysts.

By segment, Disney’s Media and Entertainment business saw revenues decline three per cent from a year earlier to $12.73 billion, while its Parks, Experiences and Products revenue was up 36 per cent to $7.43 billion. For the fiscal year, Parks, Experiences and Products was up a full 73 per cent to $28.71 billion, but that comparison is a little misleading as the previous year had Disney’s parks dealing with COVID-related closures.

Harris said Disney has done very well with streaming, where Disney+ has outperformed expectations and the company has been astute in adding content and franchising its money-makers. Disney reported a nice bump in subscribers to its streaming platform in its latest quarter, adding 12.1 million subscriptions to hit 164.2 million, ahead of analysts’ expectations at 160.45 million.

It’s still a waiting game on Parks, Harris said, but the fundamentals look good enough for investors to consider owning Disney here.

“I do think Disney needs the parks business to be in good shape,” he said. “But from a balance sheet perspective, because they cut their dividend when [the pandemic] happened their balance sheet actually looks pretty good and I think it can actually get better if they make some of these sales.”

“It’s trading at 21x earnings, and from my perspective you’re getting a great franchise and a great brand. I think I would look to buy it here,” he said.