Disney’s share price is down more than 22% so far in 2025, and naturally, many investors are wondering: is this just a dip — or a legitimate opportunity to buy a world-class company at a discount? In this analysis, I’ll walk you through everything you need to know to make an informed decision.
We’ll begin with the two most immediate and visible risks Disney is facing, both of which are tied to the growing impact of tariffs on global trade and consumer behavior. Then, we’ll zoom out and take a long-term perspective, looking at Disney’s revenue growth, cash flow generation, and returns on invested capital.
I’ll also walk you through my proprietary discounted cash flow (DCF) model so you can see how I arrive at a fair value estimate for Disney’s shares. And finally, I’ll share whether I think Disney stock is a buy right now, given both the macro environment and the company’s fundamentals.
Two Key Risks for Disney Amid Rising Tariffs
Let’s start with the two major risks that investors should be paying close attention to. These risks are especially important in the current environment where macroeconomic forces are dominating market sentiment.
Risk #1: Pressure on Consumer Budgets Due to Higher Tariffs
The first and most immediate risk is the rising cost of goods due to escalating tariffs, particularly on imports from China. These costs are not just absorbed by corporations — they’re passed along to the consumer, and they have a real effect on consumer budgets.
Consider this: the estimated cost to manufacture an iPhone was about $500. With the recent increase in tariffs — some of which now exceed 100% — that same iPhone could soon cost $1,000 to produce. Apple, like many other companies, is likely to pass this cost increase directly to consumers. And Apple isn’t alone — countless manufacturers across the electronics, appliance, and automotive industries are facing the same challenge.
As a result, consumer budgets are being squeezed. When people are paying significantly more for essentials or big-ticket items like smartphones, refrigerators, or vehicles, they’ll have less discretionary income left over — and that’s where Disney faces near-term pressure. Family vacations to Disney theme parks, cruises, or resort stays are all big-ticket experiences. They’re not cheap. And when times get tight, they’re often among the first things families cut.
So while Disney’s brand remains strong and its parks remain desirable, the company could still see short-term softness in demand for these high-cost experiences. This is one of the biggest short-term risks for the stock.
Risk #2: Geopolitical Exposure – Disney’s $5 Billion Bet on Shanghai
The second major risk is geopolitical — and more specifically, Disney’s exposure to China. Back in 2016, Disney opened Shanghai Disneyland, a sprawling $5 billion theme park that represented the company’s bet on China’s growing middle class and consumer base. Since then, Disney has invested hundreds of millions more in maintaining and operating the park.
But that bet is now under threat. With U.S.-China tensions rising and both countries engaged in tit-for-tat tariff escalations and economic restrictions, the risk to U.S. businesses operating in China has never been higher. Disney’s physical presence in the region could become a geopolitical bargaining chip or even face regulatory pressure if relations deteriorate further.
This risk is harder to quantify but significant in scale. A disruption in operations at Shanghai Disneyland — or worse, a forced divestment — could wipe out billions in value. It’s something investors should be watching closely as trade tensions evolve.
A Longer-Term Look: Disney’s Structural Strength
Despite those near-term headwinds, Disney’s long-term business case remains incredibly compelling. And it starts with the company’s ability to grow even in the face of adversity.
Revenue Growth and Resilience
Over the last decade, Disney has navigated not one, but two major industry disruptions: the COVID-19 pandemic, which temporarily shut down its most profitable business lines, and the shift from linear TV to streaming, which fundamentally changed the way media companies generate revenue.
The pandemic caused a significant, short-term collapse in revenue. Theme parks were shuttered. Cruise ships were docked. Movie releases were delayed or canceled. But even through all of that, Disney managed to keep growing. That’s a testament to the company’s diversified business model, strong leadership, and — most importantly — its unparalleled intellectual property portfolio.
Today, Disney’s brand includes some of the most valuable entertainment franchises in the world: Star Wars, Marvel, Pixar, ESPN, and of course, its original animated classics. This IP gives Disney enormous pricing power, creative leverage, and a built-in global fanbase.
The Streaming Pivot: Painful but Necessary
In the short term, Disney’s pivot to streaming was a drag on profitability. Launching Disney+ and ramping up content spending hit margins. But over the long run, this move could significantly improve the company’s economics.
Why? Because the direct-to-consumer model is structurally more profitable than the old cable bundle. By cutting out the middleman and going straight to the viewer, Disney can capture more value per subscriber. Plus, as mobile device usage and high-speed internet access increase worldwide, content consumption is rising — and that’s a huge tailwind.
People can now watch Disney content in an Uber, on a train, at a coffee shop — anywhere with a phone and an internet connection. That’s a massive change compared to 15 years ago when entertainment was limited to living rooms and cable packages.
Financial Health and Cash Flow
One metric I closely watch for Disney is its cash flow from operations to sales ratio. Prior to the pandemic, this ratio was approaching 25%, which is an excellent figure for a company with such a large physical and media footprint.
As the business continues to recover and streaming economics improve, I expect this ratio to climb back toward that level — perhaps even surpassing it — over the next two years. That’s especially likely if demand for experiences like theme parks and cruises rebounds as inflation cools or tariffs stabilize.
Another important point: Disney’s fixed assets — its theme parks, resorts, and cruise ships — are more valuable today than they were even five years ago. Why? Because these assets offer consumers a service-based experience in a world where goods are getting more expensive. If tariffs continue to drive up the price of physical items, services like entertainment and travel become relatively more attractive.
My Valuation: Disney’s Intrinsic Value
Let’s talk numbers.
Based on my discounted cash flow (DCF) model — which factors in conservative growth assumptions and a long-term free cash flow margin recovery — I estimate Disney’s fair value to be around $116 per share.
With the current share price around $88, that implies a margin of safety of roughly 24%. In other words, I believe Disney is undervalued at current levels.
If you look at traditional valuation metrics, the stock is also compelling. Disney is currently trading at a forward price-to-earnings ratio of just 14, which is the lowest we’ve seen in the last five years, excluding the pandemic distortions. Even if we go back to 2018 or 2019, before streaming disruptions really took hold, you’d be hard-pressed to find Disney trading this cheaply.
Final Thoughts: Is Disney a Buy?
Let’s bring it all together.
Short-term, yes — Disney faces real headwinds. Tariffs are tightening consumer budgets. Recession risk is looming. And geopolitical uncertainty could impact one of its largest international investments.
But longer term, Disney remains one of the best-positioned entertainment companies in the world. It has:
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An unmatched portfolio of intellectual property
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A growing and maturing streaming platform
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Valuable physical assets that benefit from a shift toward service-based spending
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And strong cash flow potential that should rebound post-pandemic
If the U.S. does not enter a recession, Disney’s physical businesses are poised for strong performance. If we do go into a recession, Disney will likely feel the pinch — but for long-term investors, that could represent a chance to accumulate shares at an even bigger discount.
Either way, the long-term structural picture looks solid — especially if tariffs persist and consumers shift more toward services and experiences.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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