Disney, the entertainment titan, is seeing its shares trade at their lowest level in nearly a decade, with investors’ faith in the company’s enduring allure seemingly on shaky ground. On Monday, Disney shares were trading at approximately $84, a figure that harks back to October 2014, the last time they dipped below this value. The company’s long-term stock performance has been dwarfed by many other notable stocks, failing to match the market’s vigorous growth.

Over the past decade, Disney’s return on investment has been a meager 12%, a stark contrast to the 130% surge witnessed by the S&P 500. The company’s earnings before interest, taxes, depreciation, and amortization have also taken a hit, plummeting from $17.4 billion in 2018 to $11.5 billion in the last year. Amidst a broad decline in profitability in linear television, Disney’s performance over the decade has been subpar compared to its competitors, with companies like Netflix boasting a staggering 900% gain over the same period.

Disney Shares at Lowest Level Since 2014: A Look into the Factors

Disney shares have hit their lowest mark since October 2014, trading at roughly $84 on Monday. This decline has been attributed to wavering investor confidence due to the company’s disappointing long-term stock performance, which lags behind many comparable stocks.

A Decade of Underperformance

Over the past decade, Disney’s returns have been dwarfed by the broader market. Since October 2014, Disney’s return stands at 12%, compared to a 130% jump for the S&P 500. In the past five years, Disney has lost 25% while the S&P gained 53%. Over the last 10 years, Disney’s 55% gain pales against the S&P’s robust 170% gain, as per FactSet data. Furthermore, Disney ranks as the 78th-worst performing stock out of the 468 S&P companies publicly traded over the last 10 years.

The Impact of Declining Profitability

Disney’s earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $17.4 billion in 2018 to $11.5 billion in 2021. The company has been hit hard by a general decline in profitability in linear television. However, its 55% return over the last decade compares favorably to similarly exposed stocks like CBS parent Paramount (down 57%) and HBO and CNN parent Warner Bros. Discovery (down 68%).

Losing Ground in the Entertainment Sector

In the entertainment industry, Disney’s performance has been overshadowed by companies like Netflix, which saw over a 900% gain in the last decade. Other long-standing large-cap stocks like Apple, Microsoft, Amazon, Berkshire Hathaway, and Coca-Cola have all outperformed Disney.

Market Capitalization Decline

In 2015, Disney was the 31st most valuable company globally, with a market capitalization of $178 billion. As of now, it stands as the 69th largest firm, with a market cap of $154 billion.

Looking Ahead

Disney shares are down 5% year-to-date, reacting to a drop in subscribers for its Disney+ streaming service, which reported a loss of $512 million last quarter. If Disney decides to offload its linear television assets, including ABC and ESPN, it could contribute to a possible turnaround.

Takeaways

While Disney is undoubtedly experiencing a rough patch, it’s vital to remember that this entertainment giant has withstood numerous market cycles and industry shifts. With strategic adjustments, cost reductions, and a continued focus on its streaming services, Disney could well navigate these choppy waters to re-emerge as a formidable player in the entertainment sector. As Daiwa analyst Jonathan Kees noted, Disney is poised to be a "survivor and winner in the streaming wars." The current share price could present a buying opportunity for long-term investors who believe in Disney’s resilience and capacity for growth.