Opinions
Danesh Rohinton
Walt Disney Co.
DIS-N
DON'T BUY
Jul 25, 2024
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.
Going through a rough patch. The parks have become more expensive. Challenges in streaming, playing significant catchup to NFLX. He'd pass. Though valuation is as cheap as it's been in a decade, it's for good reason. EBITDA pressures are building in a lot of different ways.
There is an opportunity for it to turn things around in streaming. But when you're playing the #2 to NFLX, which has already achieved a huge subscriber base and is now pushing price and content, DIS has to disproportionately win in the content creation game. DIS doesn't actually own ESPN right; it has to bid on them. For example, the NBA recently went with AMZN.