Opinions
Gordon Reid
Walt Disney Co.
DIS-N
TOP PICK
Jan 30, 2018
Stock price when the opinion was issued
You might be interested:
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.
He owned this in the past and sold at 3 or 4 years ago, because a great percentage of revenues and profits were made up of ESPN and ABC, and he was seeing cord cutting and subscriber growth waning. The purchase of 21st-century Fox will take those shackles off. They are getting a great library, but also control of HULU, a streaming medium. They own 30% already, but 21st-century Fox also owns 30%, so they now have majority ownership. A year from now we are going to see that "glass half empty" of cord cutting into a "glass half full". They are going to take Netflix on and you are going to see a Disney channel being streamed into homes. Trading at a reasonable multiple. Dividend yield of 1.5%. (Analysts' price target is $119.18.)