Disney Drama: Why Savvy Investors Are Buying the Panic

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Much of the worry and uncertainty surrounding Walt Disney (NYSE:DIS) stock recently subsided.

However, DIS stock hasn’t fully recovered yet; it’s not even close. This presents a terrific opportunity to scoop up some Disney shares before they get re-priced higher.

Just take a moment to consider how legends like Benjamin Graham, Warren Buffett, Charlie Munger and Peter Lynch succeeded as investors. Did they follow the crowds to the exits during times of fear and dread?

Not at all. Instead, they bought what the frightened crowds were selling, and you still have a chance to invest like Graham and Buffett now, but don’t expect DIS stock to stay cheap for much longer.

Why Did Some Traders Panic-Sell DIS Stock?

If you’re too reactive when the financial media prints scary headlines, you may end up selling perfectly good stocks. Thus, some folks made the mistake of divesting their Disney shares because the company was embroiled in a standoff with cable television giant Charter Communications (NASDAQ:CHTR).

The dispute was about how the two companies should package and distribute direct-to-consumer video content.

You might have thought it was the end of the world after reading headline snippets like “Why Disney Could Cave First,” “a dispute that leaves future of cable TV in doubt” and “The Disney row that threatens to topple traditional television.”

Even Charter Communications President Christopher Winfrey apparently got caught up in the panic, declaring, “We are on the edge of a precipice.”

Oppenheimer analysts, meanwhile, considered the worst-case scenario, warning that the dispute with Charter Communications could cost Disney $4 billion per year in free cash flow.

Those headlines were all from Sept. 8. Can you guess what happened a few days later, right after some traders undoubtedly panic-sold DIS stock?

They Reached a Deal Disney Is Still a Steal

Lo-and-behold, on Sept. 11, Disney struck a deal with Charter Communications. Do you think it’s a mere coincidence that this occurred just in time for the Buffalo Bills-New York Jets game to be aired on ESPN?

I assure you, there are no mere coincidences when so many billions of dollars are at stake. The so-called cable blackout was averted and 15 million households wouldn’t have to miss their favorite programs.

Moreover, Disney wouldn’t have to lose $4 billion per year in free cash flow.

Really, all of this trepidation was just an extension of the market’s disappointment with Disney’s third-quarter fiscal 2023 results. More or less, Disney has been in the market’s penalty box ever since that earnings release.

That’s odd, since Disney’s results weren’t all that bad. The company’s revenue increased 4% year over year, and Disney’s adjusted diluted EPS only declined 6%. Disney’s free cash flow ballooned from $187 million in the year-earlier quarter to $1.637 billion in Q3 FY2023.

Disney Might Not Stay Down for Much Longer

If you read this and act quickly, you might still snatch some Disney shares before they fully recover. The apparent crisis has passed, and besides, Disney’s fundamentals haven’t been too bad this year.

Therefore, it probably won’t take long for Disney to get a re-rating on Wall Street. I encourage anyone who wants to be like Buffett, Munger and other non-panicky investors to consider buying DIS stock today.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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