Disney stock is a bargain on the dip, Jim Cramer says

CNBC’s Jim Cramer on Tuesday told investors why he thinks now is a good time to invest in Disney, saying the entertainment giant’s stock is more valuable than its current price.

“Disney reported an excellent quarter a couple weeks ago, but didn’t get any credit for it, mostly because management didn’t want to aggressively raise their full-year forecast so early in the year,” Cramer said. “But the dip here has created a terrific buying opportunity for you, with the stock now trading at bargain levels relative to the kind of valuation it used to get.”

Cramer first reviewed his own history with the stock, saying the CNBC Investing Club’s Charitable Trust has owned Disney since 2018, and during that time it has “gone from a huge winner to being a frustrating holding.”But he said he’s been willing to stick with the company because of its entertainment portfolio and “underappreciated”parks business. Cramer noted that shares climbed at the end of last year when Disney boasted growth and an optimistic outlook, months after the end of a long and arduous proxy battle.

But the stock dipped after the company reported earlier in February. Even though Disney topped earnings and revenue estimates, Wall Street was disappointed that it failed to raise guidance and that its Disney+ streaming service saw a decline in subscribers. While a guidance hike is preferable, Cramer said, he approved of management’s caution during the earnings call, like when CFO Hugh Johnston cited a “rapidly evolving macro environment.” Cramer was also optimistic on the streaming side of the business, noting the segment still turned a profit after a boost from Hulu, and that CEO Bob Iger said subscriber churn wasn’t as severe as the company expected given the recent price hike.

Cramer highlighted aspects of the quarter he found to be encouraging, including the general turnaround in streaming and the direct-to-consumer segment. He was also impressed with Disney’s parks and cruise arm, saying it performed well even though investors had been concerned the hurricanes would hurt business. And the company’s sports sector managed to beat expectations as it prepares to launch a new ESPN platform, he added.

“After looking into the reasons why people sold Disney after the quarter, I’ve got to tell you. I think the bear case: thin.”

Disney did not immediately respond to request for comment.

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Disney.