The Walt Disney Co.: Bull/Bear Discussion
Walt Disney Company
TMT
01/21/2020
Presented
| Date | 01/16/2020 |
| Price | $145.12 |
| Market Cap | $261.56B |
| Ent Value | $291.55B |
| P/E Ratio | 20.85x |
| Book Value | $49.90 |
| Div Yield | 1.21% |
| Shares O/S | 1,802.40M |
| Ave Daily Vol | 10,264,478 |
| Short Int | 1.15% |
Current
| Price | $94.22 |
| Market Cap | $170.88B |
| The Walt Disney Co. is a diversified international family entertainment and media enterprise. It operates through the following segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, radio networks and stations. The Parks, Experiences and Products segment owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. This segment distributes films primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The DTCI segment licenses the company's trade names, characters and visual and literary properties to various manufacturers, game developers, publishers and retailers throughout the world. It also develops and publishes games, primarily for mobile platforms, and books, magazines and comic books. This segment also distributes branded merchandise directly through retail, online and wholesale businesses. The Walt Disney was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA. |
Publicly traded companies mentioned herein: Amazon Inc (AMZN), CBS Corp (CBS), Charter Communications Inc (CHTR), Comcast Corp (CMSCA), Netflix Inc (NFLX), Walt Disney Co/The (DIS)
Highlights
On January 16th, 2020, DeMatteo Research hosted a bull/bear discussion on Walt Disney Co/The (DIS). The group shared a wide range of opinions on DIS’s DTC segment, Disney+’s, international expansion, valuation, pricing, among other topics. The most bearish presenter believes that the stock could experience ~30% downside once weakness begins to appear in the DTC story and if subscriber growth meaningfully slows after this quarter. Another bear believes that Disney doesn’t have the same level of brand recognition internationally as it does domestically, has given up some pricing on their product in return for minimum guarantees and that the upcoming NFL renewal will see dramatic inflation.
Bulls feel that the story largely hinges on the success of Disney+ and are confident in the performance of the parks. They are more optimistic on DTC and the international launch of Disney+. Based on a SOTP analysis, one bull believes that based on a core EPS number of $9.50 - $10.00 and earlier profitability in DTC that the stock can get to $240/share in the next 2.5 years.
Short Thesis
After having been a DIS investor in 2019 one participant believes that the risk/reward has changed significantly and at the current valuation there is a risk to numbers going forward. For 2021 EPS, he’s currently modeling ~$5.00. Having evaluated DIS’s FCF profile over the last few quarters, he believes that the ~$70B acquisition of Fox and the subsequent 80% decline in FCF is a pretty good indicator of where earnings are likely headed, and he sees risk to those numbers.
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