In light of today’s sell-off in Disney, we want to provide an update to our view about the stock.

Candidly, after today’s move, we would not be surprised to see Disney shares tread water for a bit, or at least until we get closer to the second half of fiscal 2022, which is when the surge of new flagship, must-watch content will hit Disney’s streaming platform.

This type of trading pattern could be not so different from how Netflix traded after its immediate pandemic pull-forward of demand up until the anticipation of their September Tudum event and the release of "Squid Game," which reinvigorated interest in the streaming service. Netflix went nowhere from July 2020 to July 2021 before going on a tear on the excitement of new content drops and the subscriber additions that followed.

If we think Disney could be stuck in a holding pattern for a couple of quarters, then one question you may have for us is why we are staying the course and sticking with our small position? Why not cut and go on a position that has a weighting in the charitable trust of only 1.54%?

First off, Disney is much more than just a streaming company. We are very bullish about the theme park recovery and believe the margins on this profit engine of a business will exceed pre-pandemic levels over the long run. Disney has an incredible amount of pricing power right now, customers are adopting new guest experiences and services like Genie+, children are finally getting vaccinated, and the international traveler recovery to the domestic parks has only just begun.
Second, we believe Disney has some of the most valuable intellectual property in the world, and management must now become more aggressive in finding ways to monetize its assets. Whether it be through ESPN and sports gambling, Disney+ — and the role it will have in the metaverse — or something we aren’t even thinking about, Disney has plenty of levers it can pull to unlock value.

Today’s sell-off is painful and a disappointment because we thought the market had braced for a Disney+ net add shortcoming after CEO Bob Chapek took down numbers at a September Goldman Sachs conference. This didn’t happen as we anticipated, and we got it wrong, but let’s take a closer look at the damage being done today and how far this sell-off has gone.

At the current price of roughly $160 per share, Disney is now trading about $5 from its levels before the December 2020 Investor Day, despite zero change in long-term subscriber guidance.
- We think it’s wrong for investors to sell Disney so close to these levels given the continued improvements achieved in the parks — and the fact that next summer is when the majority of Disney’s highly anticipated flagship titles announced at the event will begin to hit the Disney+ platform. We find it difficult to question the credibility of management’s long targets because the best of their content pipeline has not even been released yet.

It may take some time, but we say stick with Disney and we want to buy this weakness because the quality of the content pipeline means the best days for the Disney+ are ahead and not in the past. We would be adding to our position today if we were not restricted.

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(Jim Cramer's Charitable Trust is long DIS.)