Opinions
Gordon Reid
Walt Disney Co.
DIS-N
TOP PICK
Jan 30, 2018
Stock price when the opinion was issued
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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.
Mixed feelings. On the positive side, doing exceptionally well in streaming with a great library and great branding. Cross-sells better than anyone. Worried about the parks in the short term -- consumer slowdown, expecting global backlash against the US. Hard to bet against its 6-decade growth story for the long term. Balance sheet in fine shape, decent cashflow. Yield is 0.8%.
Streaming turned profitable by end of 2024, finally, after a reorganization, and is now a major growth driver. Theme parks have been the largest profit generator and they keep coming out with new parks; people are paying high amounts to enjoy them. He expects healthy earnings to come. They will announce a deal between their ESPN and the NFL--sports drives huge profits. Everything is going right, but they need to appoint a successor to Bob Iger.
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.)