Opinions
Greg Dean
Walt Disney Co.
DIS-N
COMMENT
Aug 02, 2016
Stock price when the opinion was issued
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Lumpy road to recovery, but Iger's making progress. Streaming is becoming profitable. Content offerings are turning around, with a huge library. Parks have slowed, investment has increased; yet still a destination vacation for many across the world. Good growth in cruise ships. Undemanding multiple under 20x PE. She's being patient; upside from here.
Theme parks are hanging in despite a tough consumer and DIS doesn't expect weakness in consumers. Streaming is replacing cable. Likes the Abu Dhabi news.
Most important is that market sentiment has been depressed for so long, so this report changes that sentiment. Subs on streaming were strong. He likes this report.
A lot going on here in recent years, but just a few years ago, the stock was nearly doubled, based on hopes for Disney+. That said, they will be a long-term winner in streaming; their content is strong around the world. Also, their theme parks keep selling, and are expanding internationally. Probably we've seen peak Marvel, but Disney holds a deep catalogue of content, including Star Wars. If they can sort out management and make streaming profitable, they should return to 20% margins.
Spike in stock is due to fears of an economic slowdown being put at bay. Theme parks are expanding, but will depend on macro environment. ESPN is more challenged. Disney+ is challenged because NFLX is beating everybody. Paying 20x PE for 12-13% growth. Doesn't dislike the name, but some segments are having a tough go.
The Golden ticket within this company is ESPN. We have seen the peak of franchise values, and a lot of that has to do with cord cutters. The recent franchises are able to be as valuable as they are today, has predominantly been driven by TV money, and TV money has been coming from the $6-$7 a month that ESPN subs are kicking up to Disney. When you share half your revenues with your players, and wage inflation is going to be somewhat sticky, so Disney is on the hook to write these bigger checks to keep the ESPN franchise growing, but their attrition from customers is increasing. People are finding other ways to watch sports. He worries that the engine that has fuelled business growth over the past 10 years, won’t be there over the next 10.