Walt Disney
Re: Walt Disney
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DIS - US2546871060
The Walt Disney
110,395 $ +11,35 %
Temps différé - NYSE - 08/02 - 17:23
DIS - US2546871060
The Walt Disney
110,395 $ +11,35 %
Buy and Hold blijft mijn strategie, tenzij een aandeel 20 percent gestegen is in een periode van enkele weken/maanden na aankoop.
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Re: Walt Disney
Disney's Q2 Earnings Sparkle With Shares Still Trading At An Undervaluation
Jun. 13, 2024 9:23 AM ETThe Walt Disney Company (DIS)
Summary
Disney reported strong Q2 results with underlying profitability improvements overshadowed by a $2.1 billion goodwill impairment.
Multiple successes such as profitable DTC business along with great performance by the experiences division suggest Disney's core products continue to resonate with consumers.
Shares appear 22% undervalued after the recent market sell-off suggesting a real GARP opportunity could exist in the company's stock.
Closure of the proxy battle and legal dispute with Ron DeSantis have reduced Disney's ESG risk profile in my opinion.
Investment Thesis
The Walt Disney Company (NYSE:DIS) produced a pretty solid set of Q2 results where underlying profitability improvements were obscured from view by a massive $2.1 billion one-off impairment.
Without the impacts of these charges, Disney would have generated what I believe is a wonderful set of earnings data with multiple operational efficiency improvements along with their DTC business finally becoming profitable helping to bolster net income.
The current share price suggests a 22% undervaluation given my base-case intrinsic value calculation. This is up from just a 14% undervaluation in February 2024 (my last update on DIS) which has come primarily as a result of a pullback in the stock's price.
I maintain my intrinsic value target for Disney of around $129 and continued to rate the firm a Buy at present time.
Company Background
Disney is an undisputed entertainment juggernaut with the American company sporting one of the most iconic portfolios of media franchises currently in existence.
Through multiple acquisitions of smaller yet hugely popular studios such as Lucasfilm’s Star Wars and Marvel, Disney has expanded the breadth of their target demographic massively.
Simultaneously, The Walt Disney Company has continued to excel at further commercialising their massive portfolio of content through various media formats such as linear TV, movies, TV shows, music and even computer games.
Disney also has a massive physical entertainment business consisting of their famous theme parks, holiday resorts and even a cruise line.
The massive diversification pursued by Disney over the past three decades has allowed the firm to become an almost unavoidable element of the daily lives of millions of people across the globe.
I wrote a holistic in-depth analysis of Disney’s economic moat and business dynamics back in late-2023 in an article titled: “Disney: The Deep-Value Play of 2023”.
I still believe that the majority of analysis in that article rings true today, which is why I whole heartedly implore you to read that piece so as to gain a better understanding into how the company makes their money.
Earnings Analysis – Q4 & Full Year 2023
Since my last update on Disney back in late-February, 2024, a few material changes have occurred at the firm from a fiscal perspective as evidenced by the company’s most recent Q2 earnings report.
Top-line revenues for the entire Walt Disney Company increased 1% YoY to $22.1 billion while total income before taxes fell 69% YoY.
While these figures may initially sound very concerning, the reality is that Disney made multiple tangible operational improvements in the past quarter with a few one-off items perhaps distorting their overall income figures.
The major item impacting the firm’s operating income came from $2.1 billion in goodwill impairments absorbed as a result of the Star India divesture.
Worth noting is the inability for companies to deduct tax from goodwill impairments which increased Disney’s effective tax rate significantly from 29.9% to 67.1%.
Without these goodwill impairments, Disney’s bottom-line net income would have been closer to around $2 billion rather than the $20 million loss made in Q2.
This would have left net income up around 40% YoY (after accounting for taxes at a hypothetical yet realistic 25% rate) which in my opinion is much more representative of the superb profitability improvements made at the company during the last quarter.
Most notably, Disney’s DTC streaming business finally becoming cashflow positive generating $5.64 billion in revenues and even more importantly, an operating income of $47 million compared to the $587 million loss in the same quarter one year prior.
Disney’s ability to generate profits from this segment came thanks to lower distribution costs, increased subscriber revenues and increased advertising revenues.
While Disney+ may still tail Netflix in overall subscriber count, the platform undeniably has a market-leading portfolio of content for viewers to enjoy with the recent bundle tie-up with Warner Brother’s Discovery’s (WBD) MAX service only further bolstering this competitive advantage for the firm.
On the topic of paid subscribers, Disney+ saw a 17% YoY increase to 54 million total paid subscribers at the end of Q2. This increase cam party as a result of price increases in certain regions along with a crackdown on account sharing.
Disney+ is now offered in certain “wholesale” packages which has slightly decreased the firm’s U.S. domestic revenue per subscriber from $8.15 in FY23 Q2 to $8.00 in the most recent one.
Nevertheless, I really like the trajectory Disney+ is on and see the media giant successfully replacing linear TV revenues in the long run. While a prediction on how long this process may take is difficult to provide due to the multitude of variables and competitors in the space, Disney has historically been very good at extracting profitability from new business ventures.
Total entertainment segment revenues fell 5% YoY due to a decrease in linear networks revenues being slightly greater than the gains made in the DTC category.
However, operating income increased 72% as a result of the massive turnaround achieved in the streaming business.
Disney’s experiences business continued their earlier Q1 earnings romp by producing a wonderful 10% top-line revenue growth along with a 12% expansion of operating income to $2.3 billion.
These superb results came as a result of strong demand by consumers for the firm’s Walt Disney World Resort and Cruise Line products. Both higher ticket prices along with successfully implemented cost saving initiatives helped bolster the bottom line.
However, it is worth nothing that while international experiences revenues increased 29% YoY, operating income only expanded 7%. This was due to ongoing inflationary pressures on Disney’s supply-side operations along with a weaker consumer demand environment in Europe and Asia.
Overall, Q2 produced what I deem to be a pretty wonderful set of results for the entertainment giant. While the goodwill impairment absorbed with the Star India divestiture was regrettable, I believe the firm is in a better position than ever to continue generating great returns in quarters to come.
April 2024 also saw the end of the proxy battle between Nelson Peltz’s Trian Partners and Disney’s CEO Iger with Bob maintaining control of the company after the shareholder vote.
I personally believe Iger is well suited to lead Disney for the coming year although I also appreciated the pressure for operational improvement brought to the discussion by Peltz.
Seeking Alpha’s Quant continues to assign Walt Disney with an “F” Valuation rating. I still think this is an excessively pessimistic letter grade considering both the underlying improvements being made at the firm along with the heavy discount of DIS stock relative to historic averages.
The current P/E GAAP FWD ratio of 33.36x is quite reasonable in my opinion given the solid growth prospects at Disney. The current P/S TTM of 2.01x is at what I would consider a reasonable long-term level and certainly not indicative of a massive overvaluation in shares.
I also just want to quickly highlight that the current FWD P/B ratio of 1.80x is quite low indeed. Given Disney’s massive breadth and presence in multiple different business areas, it appears that the current valuation does not fully price-in the true scale of the firm’s operations.
A quick comparison of DIS stock against the ever-popular S&P 500 tracking exchange traded fund SPY (SPY) using Seeking Alpha’s 1Y Advanced Chart function provides an interesting view into the performance of shares over the past annum.
Solid profitability improvements have buoyed Disney’s stock with the most recent earnings report triggering a small selloff in shares. I can only speculate that this drop-off in investor sentiment has occurred as a result of the perhaps initially misleading headline earnings figures.
Fundamentally, I continue to rate the most recent Q2 results highly and believe a solid improvement in profitability is being achieved at the media giant.
Bron: https://seekingalpha.com/article/469906 ... rvaluation?
Jun. 13, 2024 9:23 AM ETThe Walt Disney Company (DIS)
Summary
Disney reported strong Q2 results with underlying profitability improvements overshadowed by a $2.1 billion goodwill impairment.
Multiple successes such as profitable DTC business along with great performance by the experiences division suggest Disney's core products continue to resonate with consumers.
Shares appear 22% undervalued after the recent market sell-off suggesting a real GARP opportunity could exist in the company's stock.
Closure of the proxy battle and legal dispute with Ron DeSantis have reduced Disney's ESG risk profile in my opinion.
Investment Thesis
The Walt Disney Company (NYSE:DIS) produced a pretty solid set of Q2 results where underlying profitability improvements were obscured from view by a massive $2.1 billion one-off impairment.
Without the impacts of these charges, Disney would have generated what I believe is a wonderful set of earnings data with multiple operational efficiency improvements along with their DTC business finally becoming profitable helping to bolster net income.
The current share price suggests a 22% undervaluation given my base-case intrinsic value calculation. This is up from just a 14% undervaluation in February 2024 (my last update on DIS) which has come primarily as a result of a pullback in the stock's price.
I maintain my intrinsic value target for Disney of around $129 and continued to rate the firm a Buy at present time.
Company Background
Disney is an undisputed entertainment juggernaut with the American company sporting one of the most iconic portfolios of media franchises currently in existence.
Through multiple acquisitions of smaller yet hugely popular studios such as Lucasfilm’s Star Wars and Marvel, Disney has expanded the breadth of their target demographic massively.
Simultaneously, The Walt Disney Company has continued to excel at further commercialising their massive portfolio of content through various media formats such as linear TV, movies, TV shows, music and even computer games.
Disney also has a massive physical entertainment business consisting of their famous theme parks, holiday resorts and even a cruise line.
The massive diversification pursued by Disney over the past three decades has allowed the firm to become an almost unavoidable element of the daily lives of millions of people across the globe.
I wrote a holistic in-depth analysis of Disney’s economic moat and business dynamics back in late-2023 in an article titled: “Disney: The Deep-Value Play of 2023”.
I still believe that the majority of analysis in that article rings true today, which is why I whole heartedly implore you to read that piece so as to gain a better understanding into how the company makes their money.
Earnings Analysis – Q4 & Full Year 2023
Since my last update on Disney back in late-February, 2024, a few material changes have occurred at the firm from a fiscal perspective as evidenced by the company’s most recent Q2 earnings report.
Top-line revenues for the entire Walt Disney Company increased 1% YoY to $22.1 billion while total income before taxes fell 69% YoY.
While these figures may initially sound very concerning, the reality is that Disney made multiple tangible operational improvements in the past quarter with a few one-off items perhaps distorting their overall income figures.
The major item impacting the firm’s operating income came from $2.1 billion in goodwill impairments absorbed as a result of the Star India divesture.
Worth noting is the inability for companies to deduct tax from goodwill impairments which increased Disney’s effective tax rate significantly from 29.9% to 67.1%.
Without these goodwill impairments, Disney’s bottom-line net income would have been closer to around $2 billion rather than the $20 million loss made in Q2.
This would have left net income up around 40% YoY (after accounting for taxes at a hypothetical yet realistic 25% rate) which in my opinion is much more representative of the superb profitability improvements made at the company during the last quarter.
Most notably, Disney’s DTC streaming business finally becoming cashflow positive generating $5.64 billion in revenues and even more importantly, an operating income of $47 million compared to the $587 million loss in the same quarter one year prior.
Disney’s ability to generate profits from this segment came thanks to lower distribution costs, increased subscriber revenues and increased advertising revenues.
While Disney+ may still tail Netflix in overall subscriber count, the platform undeniably has a market-leading portfolio of content for viewers to enjoy with the recent bundle tie-up with Warner Brother’s Discovery’s (WBD) MAX service only further bolstering this competitive advantage for the firm.
On the topic of paid subscribers, Disney+ saw a 17% YoY increase to 54 million total paid subscribers at the end of Q2. This increase cam party as a result of price increases in certain regions along with a crackdown on account sharing.
Disney+ is now offered in certain “wholesale” packages which has slightly decreased the firm’s U.S. domestic revenue per subscriber from $8.15 in FY23 Q2 to $8.00 in the most recent one.
Nevertheless, I really like the trajectory Disney+ is on and see the media giant successfully replacing linear TV revenues in the long run. While a prediction on how long this process may take is difficult to provide due to the multitude of variables and competitors in the space, Disney has historically been very good at extracting profitability from new business ventures.
Total entertainment segment revenues fell 5% YoY due to a decrease in linear networks revenues being slightly greater than the gains made in the DTC category.
However, operating income increased 72% as a result of the massive turnaround achieved in the streaming business.
Disney’s experiences business continued their earlier Q1 earnings romp by producing a wonderful 10% top-line revenue growth along with a 12% expansion of operating income to $2.3 billion.
These superb results came as a result of strong demand by consumers for the firm’s Walt Disney World Resort and Cruise Line products. Both higher ticket prices along with successfully implemented cost saving initiatives helped bolster the bottom line.
However, it is worth nothing that while international experiences revenues increased 29% YoY, operating income only expanded 7%. This was due to ongoing inflationary pressures on Disney’s supply-side operations along with a weaker consumer demand environment in Europe and Asia.
Overall, Q2 produced what I deem to be a pretty wonderful set of results for the entertainment giant. While the goodwill impairment absorbed with the Star India divestiture was regrettable, I believe the firm is in a better position than ever to continue generating great returns in quarters to come.
April 2024 also saw the end of the proxy battle between Nelson Peltz’s Trian Partners and Disney’s CEO Iger with Bob maintaining control of the company after the shareholder vote.
I personally believe Iger is well suited to lead Disney for the coming year although I also appreciated the pressure for operational improvement brought to the discussion by Peltz.
Seeking Alpha’s Quant continues to assign Walt Disney with an “F” Valuation rating. I still think this is an excessively pessimistic letter grade considering both the underlying improvements being made at the firm along with the heavy discount of DIS stock relative to historic averages.
The current P/E GAAP FWD ratio of 33.36x is quite reasonable in my opinion given the solid growth prospects at Disney. The current P/S TTM of 2.01x is at what I would consider a reasonable long-term level and certainly not indicative of a massive overvaluation in shares.
I also just want to quickly highlight that the current FWD P/B ratio of 1.80x is quite low indeed. Given Disney’s massive breadth and presence in multiple different business areas, it appears that the current valuation does not fully price-in the true scale of the firm’s operations.
A quick comparison of DIS stock against the ever-popular S&P 500 tracking exchange traded fund SPY (SPY) using Seeking Alpha’s 1Y Advanced Chart function provides an interesting view into the performance of shares over the past annum.
Solid profitability improvements have buoyed Disney’s stock with the most recent earnings report triggering a small selloff in shares. I can only speculate that this drop-off in investor sentiment has occurred as a result of the perhaps initially misleading headline earnings figures.
Fundamentally, I continue to rate the most recent Q2 results highly and believe a solid improvement in profitability is being achieved at the media giant.
Bron: https://seekingalpha.com/article/469906 ... rvaluation?
Buy and Hold blijft mijn strategie, tenzij een aandeel 20 percent gestegen is in een periode van enkele weken/maanden na aankoop.
Re: Walt Disney
Walt Disney stock extends losing streak for its seventh straight session
Jul. 25, 2024
The Walt Disney Company (NYSE:DIS) stock closed negatively on Thursday, continuing its seven-day slump during which it lost 8.3%.
Shares of the entertainment conglomerate closed -0.63% at $89.23 closer to its 52-week low of $78.73. The stock has gained 3.04% in value in the last 12 months.
Disney has closed in the green for three trading days in July so far. During the month of June, it closed positively for 7 out of 19 sessions.
Looking at Seeking Alpha's Quant Ratings, the Burbank, California-based company has a Hold rating with a score of 3.27 out of 5. The company received an A+ for profitability and a B- for its growth prospects. The stock also got a D- for its valuation compared to an F six months ago.
Turning to the Wall Street community, about 16 out of 32 analysts in the last 90 days gave the stock a Strong Buy recommendation, with 7 giving the stock a Buy recommendation and another 8 giving the stock a Hold. The remaining 1 analyst gave the stock a Strong Sell recommendation.
Seeking Alpha analysts are optimistic and see the stock as a Buy.
"Streaming services aim for profitability by 2024 end; parks and cruise investments show recovery post-COVID-19; DIS faces competition and creativity issues, affecting long-term growth," reads a Seeking Alpha analysis by Oliver Rodzianko.
Another report by Seeking Alpha analyst Julian Lin noted that Disney is set to extend its media rights package with the WNBA through ESPN, hoping to boost enthusiasm for women's basketball led by rising star Caitlin Clark. Management has reiterated expectations for the streaming businesses to reach profitability by the end of the year, he added in his report.
DIS 89.21 -0.66% 25/07/2024
Bron: https://seekingalpha.com/news/4128545-w ... ht-session
Jul. 25, 2024
The Walt Disney Company (NYSE:DIS) stock closed negatively on Thursday, continuing its seven-day slump during which it lost 8.3%.
Shares of the entertainment conglomerate closed -0.63% at $89.23 closer to its 52-week low of $78.73. The stock has gained 3.04% in value in the last 12 months.
Disney has closed in the green for three trading days in July so far. During the month of June, it closed positively for 7 out of 19 sessions.
Looking at Seeking Alpha's Quant Ratings, the Burbank, California-based company has a Hold rating with a score of 3.27 out of 5. The company received an A+ for profitability and a B- for its growth prospects. The stock also got a D- for its valuation compared to an F six months ago.
Turning to the Wall Street community, about 16 out of 32 analysts in the last 90 days gave the stock a Strong Buy recommendation, with 7 giving the stock a Buy recommendation and another 8 giving the stock a Hold. The remaining 1 analyst gave the stock a Strong Sell recommendation.
Seeking Alpha analysts are optimistic and see the stock as a Buy.
"Streaming services aim for profitability by 2024 end; parks and cruise investments show recovery post-COVID-19; DIS faces competition and creativity issues, affecting long-term growth," reads a Seeking Alpha analysis by Oliver Rodzianko.
Another report by Seeking Alpha analyst Julian Lin noted that Disney is set to extend its media rights package with the WNBA through ESPN, hoping to boost enthusiasm for women's basketball led by rising star Caitlin Clark. Management has reiterated expectations for the streaming businesses to reach profitability by the end of the year, he added in his report.
DIS 89.21 -0.66% 25/07/2024
Bron: https://seekingalpha.com/news/4128545-w ... ht-session
Buy and Hold blijft mijn strategie, tenzij een aandeel 20 percent gestegen is in een periode van enkele weken/maanden na aankoop.
Re: Walt Disney
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Sharks Spotted: Don't Move - Downgrading Disney To A Hold
Aug. 29, 2024 3:22 AM ETThe Walt Disney Company (DIS) Stock, DIS:CA Stock
Summary
I'm downgrading Disney to a hold.
I see more near-term headwinds weighing on its experiences business, and I don't think entertainment will be able to offset the weakness for 4Q24.
I like price hikes, and password-sharing initiatives as midterm catalysts but don't see any near-term impact from them for no other reason than timing.
I share my thoughts on Disney stock here and why I don't see the stock substantially outperforming in the 2H24.
Investment thesis:
I’m downgrading Disney (NYSE:DIS) (NEOE:DIS:CA) to hold from buy post-3Q24 earnings, despite a double beat on the top and bottom lines. Management reported revenue up 4% from a year ago quarter to $23.16 billion, higher than consensus of $23.07 billion, and EPS at $1.29, higher than consensus at $1.19 per share. The stock traded lower into print and flat after; the stock is up 2.5% against the S&P500, which is up 4.3% on the one-month mark, as seen below. I'm less optimistic about Disney in the near term due to the uncertainty around the Experiences business shown by 1. management's “flattish” revenue outlook and 2. headwinds from lower consumer spend due to recession fears. Management's commentary on the call this quarter was guarded, and I think this is in big part due to more potential downside for its Experiences business. I also don’t think entertainment will necessarily save the day, in spite of streaming achieving its first profitable quarter. I think the bundling, price hikes, and password-sharing initiatives will serve as midterm tailwinds for no other reason than timing: password-sharing will kick in this September, and price hikes will occur in mid-October. This leads me to believe Disney has no real near-term catalyst to support Q4 outperformance and to offset the negatives from the experiences segment.
General overview of this quarter’s finances:
The company reported income of $3.1 billion this quarter, an improvement from a loss of $0.1 billion in a year ago quarter. EPS also witnessed an improvement and came in at $1.43 this quarter versus a loss of $0.25 in a year-ago quarter, resembling double-digit growth of 35%.
Disney has several legs of growth, with Experiences making up around 26% of total revenue at $8.38 billion this quarter, 2% higher than a year ago quarter. Entertainment makes up south of 45% of total revenue and came at $10.58 billion, 4% higher than a year ago quarter. Sports made up the smallest chunk of revenue at less than 20%, with revenue in the segment at $4.55 billion, 2% higher than a year ago quarter. Operating income for the Sports and Experiences segments came at a 3% and 6% decrease, respectively, and were offset by a +100% increase in Entertainment, which came at $1.2 billion, significantly higher than a year ago quarter at $408 million. This resulted in the company increasing its combined operating income by 19% year over year to $4.25 billion. This came a quarter earlier than the company had expected, and this was driven by stronger-than-expected DTC growth and profitable results from the ESPN+ offering. The entertainment segment's operating income tripled this quarter, mainly due to unexpected 15% DTC growth this quarter. The segment's revenue came in at $6.3 billion, higher than $5.25 billion in a year ago quarter, and operating income at $47 million, higher than a loss of $512 million in a year ago quarter. The following graph from the 3Q earnings presentation shows revenue over the last eight quarters.
For next quarter, the company is expecting operating income to go down to the single-mid-digit and for revenue to come in at a 500 basis point increase by 30%.
Let’s talk specifics:
Entertainment:
Direct-to-consumer increased to $5.8 billion this quarter, higher than expectations and a year ago quarter at $5 billion, due to increases in retail pricing and growth in Disney+ Core, adding 0.8 million quarter over quarter and 8.8 million year over year. Disney+ international subscribers suffered a loss of 0.1 million. Linear networks suffered and came in at $2.7 billion this quarter, lower than a year ago quarter at $2.9 billion. This happened due to declines in advertising revenue caused by a decrease in impressions and lower affiliate revenue on fewer subscribers. Content sales and licensing came in at $0.3 billion, higher than a year ago, at a loss of $0.1 billion, mainly due to the performance of Inside Out 2. Hulu subscribers increased by 0.9 million to 51.1 million versus last quarter at 50.2 million and a year ago quarter at 48.3 million. I share management’s sentiment and expect to see moderate growth in Disney+ Core and for DTC and ESPN+ to be profitable. As I mentioned before, next quarter won’t be eventful, as the tricks Disney has up its sleeve are expected to show up two quarters from now. What I’m referring to here by "tricks" are the company's price hike and password sharing initiatives.
Price Hikes: the company announced that it is raising prices for most plans, with Disney+, Hulu, and ESPN costing 1$ to $2 more and the most expensive plan for Hulu, including live TV, at $6 more per month. In my opinion, the company earned these price hikes due to the success it had lately in its streaming business. Disney had 183 Emmy Nominations, a reflection of its creativity and success in content like Shogun, The Bear, and the “tremendous consumption” since the launch of Inside Out 2 in November. The stock dipped over 4% on August 6 after the news, and I believe the market has priced in the negatives. One thing I’m worried about is the churn rates increasing as a result. But based on the company’s history with price hikes and its new focus on engagement through offering a wider array of programs, such as news and aggressive bundling, I don’t think the price hikes will have a negative impact on subscribers going into 2025. Over the next two years, Disney is releasing “Moana, Mufasa, Captain America, Snow White, Thunderbolts, Fantastic Four, Zootopia, Avatar, Avengers, Mandalorian, and Toy Story.” I talked about this in my last article on Disney, and I’ll say it again: “Disney is a household name that offers a sense of nostalgia.. fortunately, this can be grounded and monetized.” I believe the upcoming content mentioned above, along with the last bundle with Warner Bros. Discovery (WBD) that includes Disney+, Hulu, and Max, and its efforts to attract subscribers through ABC News Live will all play in the company’s favor on the longer-term, rather than the near-term.
Password sharing: Following the footsteps of its biggest competitor in the streaming industry, Netflix (NFLX), Disney is expecting the initiative to kick in starting in September after introducing it in June. So far, management hasn’t had “backlash at all to the notifications that have gone out and to the work that we've already been doing.” I think Netflix really paved the path for the password-sharing crackdown, so I don't expect Disney to face too much trouble there.
Parks and possible downside ahead
The Experiences segment revenue increased by 2% year-over-year this quarter, with operating income down 3%. Revenue growth was negatively impacted by moderate consumer demand during the quarter. Operating income decline came as a result of higher costs due to inflation and increased technology spending accompanying new guest offerings. The numbers are as follows: Domestic parks and experiences revenue was up to $5.8 billion this quarter, higher than a year ago quarter at $5.6 billion, and International parks and experiences revenue was also up to $1.6 billion, higher than a year ago quarter at $1.5 billion. Management is expecting a “flattish revenue number in Q4 coming out of parks” due to weaker consumer spending. Basically, lower-income consumers are spending less due to economic headwinds, and higher-income consumers are going abroad, leaving parks a little lonely. I believe this will show up on the top line in Q4, along with some of the one-time costs of cruise ship investments weighing on the bottom line. It’s also worth mentioning that up to 40% of the Experience business doesn’t come from domestic parks but from international parks and consumer products. This leaves around 60% of revenue from this segment comes from domestic parks, including cruise ships. I believe this is positive and gives the company more flexibility to offset weakness in domestic with international and vice versa.
Sports-Fate is unknown: nothing much, yet.
ESPN's domestic revenue increased to $3.9 billion, higher than a year ago, at $3.7 billion, and both ESPN International and Start India came in flat. The growth can be attributed to advertising revenue growing 17% with rate increases and sponsorship increases. The stagnation is due to increased programming and production costs, as well as lower affiliate revenue. Star India's operating loss came in higher year over year this quarter at a loss of $0.3 billion, up from $0.2 billion, mainly due to higher costs with the ICC T20 World Cup. In my opinion, Star India poses some threat to Disney’s operating income in its sports offering. This quarter, ESPN's operating income came at a 4% increase but was impacted by Star’s shortcomings and came in at a loss of 6%. Honestly, I have been looking for new catalysts, and there isn’t much there. Management sounds like a “broken record” and has been having conversations about new partnerships for several quarters now, and the one promising deal would be with the NBA, which won’t kick in until 2026.
Valuation:
Disney has a market cap of $165.07 billion and an enterprise value of $211.3 billion. Its PEG ratio is at 1.2, meaning the market is pricing in future growth, and its P/E ratio is at 34.9, reflecting the same conclusion. The investor sentiment is optimistic on Disney currently, with ~18% of Street Analysts giving the stock a strong buy and 48.5% giving it a buy. Over 30% of Street Analysts are a hold, and only 3% are a sell. I believe this means the market is pricing in the positives from the password crackdown and price hikes positives pre-maturely. The current median and mean PT have both seen a downward trajectory since late May. The median price target was at $130 in May and was constantly so through June but decreased slightly to $128 in July and currently stands at a low of $110. The mean was similar; in May, the mean came in at $124.7, and it came in slightly lower in June at $124.3. It continued to decrease through July at $123.4 and is currently at $111.08. I believe this reflects adjusted expectations over the last few months, considering the macro uncertainty. I think Disney is on the right track to boost top-line growth in 2025, but I think the Experience segment slowdown will weigh on growth in the near term. This is not a reflection of a Disney misstep but the economic landscape in general. Lower-income consumers are choosing to put their money on necessities, not luxuries. And I believe as the Fed cuts rates next month, we will see less stressed consumer spending habits in the midterm.
What’s Next?
Disney is going through its growing pains in an unfriendly macro backdrop. The company witnessed streaming profitability a quarter earlier than anticipated, with operating income tripling in the entertainment unit and its streaming businesses Disney+, Hulu, and ESPN turning a profit. Management is guiding for modest growth in Disney+ next quarter and to see profitability with DTC and ESPN+. I think the streaming growth trajectory is impressive, but I don't necessarily believe it'll offset the slowdown in Disney's Parks and Experiences that are facing trouble at home and abroad: domestically due to consumer spending headwinds and internationally in Disneyland Paris due to the Olympics. I think we'll see more attractive windows into Disney after Q4 earnings report.
Bron: https://seekingalpha.com/article/471779 ... -to-a-hold?
About DIS Stock
Symbol Last Price % Chg
DIS
89.49 -1.55%
Prev. Close
$90.90
0.66%
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Sharks Spotted: Don't Move - Downgrading Disney To A Hold
Aug. 29, 2024 3:22 AM ETThe Walt Disney Company (DIS) Stock, DIS:CA Stock
Summary
I'm downgrading Disney to a hold.
I see more near-term headwinds weighing on its experiences business, and I don't think entertainment will be able to offset the weakness for 4Q24.
I like price hikes, and password-sharing initiatives as midterm catalysts but don't see any near-term impact from them for no other reason than timing.
I share my thoughts on Disney stock here and why I don't see the stock substantially outperforming in the 2H24.
Investment thesis:
I’m downgrading Disney (NYSE:DIS) (NEOE:DIS:CA) to hold from buy post-3Q24 earnings, despite a double beat on the top and bottom lines. Management reported revenue up 4% from a year ago quarter to $23.16 billion, higher than consensus of $23.07 billion, and EPS at $1.29, higher than consensus at $1.19 per share. The stock traded lower into print and flat after; the stock is up 2.5% against the S&P500, which is up 4.3% on the one-month mark, as seen below. I'm less optimistic about Disney in the near term due to the uncertainty around the Experiences business shown by 1. management's “flattish” revenue outlook and 2. headwinds from lower consumer spend due to recession fears. Management's commentary on the call this quarter was guarded, and I think this is in big part due to more potential downside for its Experiences business. I also don’t think entertainment will necessarily save the day, in spite of streaming achieving its first profitable quarter. I think the bundling, price hikes, and password-sharing initiatives will serve as midterm tailwinds for no other reason than timing: password-sharing will kick in this September, and price hikes will occur in mid-October. This leads me to believe Disney has no real near-term catalyst to support Q4 outperformance and to offset the negatives from the experiences segment.
General overview of this quarter’s finances:
The company reported income of $3.1 billion this quarter, an improvement from a loss of $0.1 billion in a year ago quarter. EPS also witnessed an improvement and came in at $1.43 this quarter versus a loss of $0.25 in a year-ago quarter, resembling double-digit growth of 35%.
Disney has several legs of growth, with Experiences making up around 26% of total revenue at $8.38 billion this quarter, 2% higher than a year ago quarter. Entertainment makes up south of 45% of total revenue and came at $10.58 billion, 4% higher than a year ago quarter. Sports made up the smallest chunk of revenue at less than 20%, with revenue in the segment at $4.55 billion, 2% higher than a year ago quarter. Operating income for the Sports and Experiences segments came at a 3% and 6% decrease, respectively, and were offset by a +100% increase in Entertainment, which came at $1.2 billion, significantly higher than a year ago quarter at $408 million. This resulted in the company increasing its combined operating income by 19% year over year to $4.25 billion. This came a quarter earlier than the company had expected, and this was driven by stronger-than-expected DTC growth and profitable results from the ESPN+ offering. The entertainment segment's operating income tripled this quarter, mainly due to unexpected 15% DTC growth this quarter. The segment's revenue came in at $6.3 billion, higher than $5.25 billion in a year ago quarter, and operating income at $47 million, higher than a loss of $512 million in a year ago quarter. The following graph from the 3Q earnings presentation shows revenue over the last eight quarters.
For next quarter, the company is expecting operating income to go down to the single-mid-digit and for revenue to come in at a 500 basis point increase by 30%.
Let’s talk specifics:
Entertainment:
Direct-to-consumer increased to $5.8 billion this quarter, higher than expectations and a year ago quarter at $5 billion, due to increases in retail pricing and growth in Disney+ Core, adding 0.8 million quarter over quarter and 8.8 million year over year. Disney+ international subscribers suffered a loss of 0.1 million. Linear networks suffered and came in at $2.7 billion this quarter, lower than a year ago quarter at $2.9 billion. This happened due to declines in advertising revenue caused by a decrease in impressions and lower affiliate revenue on fewer subscribers. Content sales and licensing came in at $0.3 billion, higher than a year ago, at a loss of $0.1 billion, mainly due to the performance of Inside Out 2. Hulu subscribers increased by 0.9 million to 51.1 million versus last quarter at 50.2 million and a year ago quarter at 48.3 million. I share management’s sentiment and expect to see moderate growth in Disney+ Core and for DTC and ESPN+ to be profitable. As I mentioned before, next quarter won’t be eventful, as the tricks Disney has up its sleeve are expected to show up two quarters from now. What I’m referring to here by "tricks" are the company's price hike and password sharing initiatives.
Price Hikes: the company announced that it is raising prices for most plans, with Disney+, Hulu, and ESPN costing 1$ to $2 more and the most expensive plan for Hulu, including live TV, at $6 more per month. In my opinion, the company earned these price hikes due to the success it had lately in its streaming business. Disney had 183 Emmy Nominations, a reflection of its creativity and success in content like Shogun, The Bear, and the “tremendous consumption” since the launch of Inside Out 2 in November. The stock dipped over 4% on August 6 after the news, and I believe the market has priced in the negatives. One thing I’m worried about is the churn rates increasing as a result. But based on the company’s history with price hikes and its new focus on engagement through offering a wider array of programs, such as news and aggressive bundling, I don’t think the price hikes will have a negative impact on subscribers going into 2025. Over the next two years, Disney is releasing “Moana, Mufasa, Captain America, Snow White, Thunderbolts, Fantastic Four, Zootopia, Avatar, Avengers, Mandalorian, and Toy Story.” I talked about this in my last article on Disney, and I’ll say it again: “Disney is a household name that offers a sense of nostalgia.. fortunately, this can be grounded and monetized.” I believe the upcoming content mentioned above, along with the last bundle with Warner Bros. Discovery (WBD) that includes Disney+, Hulu, and Max, and its efforts to attract subscribers through ABC News Live will all play in the company’s favor on the longer-term, rather than the near-term.
Password sharing: Following the footsteps of its biggest competitor in the streaming industry, Netflix (NFLX), Disney is expecting the initiative to kick in starting in September after introducing it in June. So far, management hasn’t had “backlash at all to the notifications that have gone out and to the work that we've already been doing.” I think Netflix really paved the path for the password-sharing crackdown, so I don't expect Disney to face too much trouble there.
Parks and possible downside ahead
The Experiences segment revenue increased by 2% year-over-year this quarter, with operating income down 3%. Revenue growth was negatively impacted by moderate consumer demand during the quarter. Operating income decline came as a result of higher costs due to inflation and increased technology spending accompanying new guest offerings. The numbers are as follows: Domestic parks and experiences revenue was up to $5.8 billion this quarter, higher than a year ago quarter at $5.6 billion, and International parks and experiences revenue was also up to $1.6 billion, higher than a year ago quarter at $1.5 billion. Management is expecting a “flattish revenue number in Q4 coming out of parks” due to weaker consumer spending. Basically, lower-income consumers are spending less due to economic headwinds, and higher-income consumers are going abroad, leaving parks a little lonely. I believe this will show up on the top line in Q4, along with some of the one-time costs of cruise ship investments weighing on the bottom line. It’s also worth mentioning that up to 40% of the Experience business doesn’t come from domestic parks but from international parks and consumer products. This leaves around 60% of revenue from this segment comes from domestic parks, including cruise ships. I believe this is positive and gives the company more flexibility to offset weakness in domestic with international and vice versa.
Sports-Fate is unknown: nothing much, yet.
ESPN's domestic revenue increased to $3.9 billion, higher than a year ago, at $3.7 billion, and both ESPN International and Start India came in flat. The growth can be attributed to advertising revenue growing 17% with rate increases and sponsorship increases. The stagnation is due to increased programming and production costs, as well as lower affiliate revenue. Star India's operating loss came in higher year over year this quarter at a loss of $0.3 billion, up from $0.2 billion, mainly due to higher costs with the ICC T20 World Cup. In my opinion, Star India poses some threat to Disney’s operating income in its sports offering. This quarter, ESPN's operating income came at a 4% increase but was impacted by Star’s shortcomings and came in at a loss of 6%. Honestly, I have been looking for new catalysts, and there isn’t much there. Management sounds like a “broken record” and has been having conversations about new partnerships for several quarters now, and the one promising deal would be with the NBA, which won’t kick in until 2026.
Valuation:
Disney has a market cap of $165.07 billion and an enterprise value of $211.3 billion. Its PEG ratio is at 1.2, meaning the market is pricing in future growth, and its P/E ratio is at 34.9, reflecting the same conclusion. The investor sentiment is optimistic on Disney currently, with ~18% of Street Analysts giving the stock a strong buy and 48.5% giving it a buy. Over 30% of Street Analysts are a hold, and only 3% are a sell. I believe this means the market is pricing in the positives from the password crackdown and price hikes positives pre-maturely. The current median and mean PT have both seen a downward trajectory since late May. The median price target was at $130 in May and was constantly so through June but decreased slightly to $128 in July and currently stands at a low of $110. The mean was similar; in May, the mean came in at $124.7, and it came in slightly lower in June at $124.3. It continued to decrease through July at $123.4 and is currently at $111.08. I believe this reflects adjusted expectations over the last few months, considering the macro uncertainty. I think Disney is on the right track to boost top-line growth in 2025, but I think the Experience segment slowdown will weigh on growth in the near term. This is not a reflection of a Disney misstep but the economic landscape in general. Lower-income consumers are choosing to put their money on necessities, not luxuries. And I believe as the Fed cuts rates next month, we will see less stressed consumer spending habits in the midterm.
What’s Next?
Disney is going through its growing pains in an unfriendly macro backdrop. The company witnessed streaming profitability a quarter earlier than anticipated, with operating income tripling in the entertainment unit and its streaming businesses Disney+, Hulu, and ESPN turning a profit. Management is guiding for modest growth in Disney+ next quarter and to see profitability with DTC and ESPN+. I think the streaming growth trajectory is impressive, but I don't necessarily believe it'll offset the slowdown in Disney's Parks and Experiences that are facing trouble at home and abroad: domestically due to consumer spending headwinds and internationally in Disneyland Paris due to the Olympics. I think we'll see more attractive windows into Disney after Q4 earnings report.
Bron: https://seekingalpha.com/article/471779 ... -to-a-hold?
About DIS Stock
Symbol Last Price % Chg
DIS
89.49 -1.55%
Prev. Close
$90.90
0.66%
Buy and Hold blijft mijn strategie, tenzij een aandeel 20 percent gestegen is in een periode van enkele weken/maanden na aankoop.
