Stock (Symbol) |
Walt Disney (DIS) |
Stock Price |
$99 |
Sector |
| Retail & Travel |
Data is as of |
| September 21, 2017 |
Expected to Report |
| Nov 8 |
Company Description |
 The Walt Disney Company’s business segments include Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive. The Media Networks segment includes cable and broadcast television networks, television stations, and radio networks and stations. The Parks and Resorts segment owns and operates the Disney Resorts and Disney Cruise Line. The Studio Entertainment segment produces live-action and animated motion pictures through Walt Disney, Pixar, Marvel, Touchstone Pictures & Lucasfilm. The Consumer Products segment engages with licensees to design a range of products. Source: Thomson Financial |
Sharek’s Take |
 In early September Disney’s (DIS) CEO Bob Iger said the company is expected to have 2017 profits roughly in line with 2016’s. But that’s ok, and there’s three reasons why. First, DIS ends its fiscal 2017 on September 30th — so now we are on to 2018. Second, Disney is building Star Wars lands in its California and Orlando theme parks and these are due to open in 2019. Third, Disney’s digital subscription platform is expected to debut in 2018 with ESPN and 2019 with Disney content. Netflix is proving digital subscriptions for content is the way to go, and although ESPN is having a tough time with cable subscribers (cable network revenue was down 3% last qtr) people will pay for live sporting events. Thus, even though growth is tight right now, the company is evolving itself for infinity and beyond. Walt Disney is the world’s largest media company, with four main divisions:
CEO Bob Iger acquired Pixar, Marvel and Star Wars during his tenure and has succeeded in producing blockbuster movies that spur merchandise sales and deliver content for digital delivery. It’s a fantastic business model. And I expect digital subscriptions for ESPN and Disney movies to be the next growth opportunity for this illustrious company. Disney is one of the safest stocks in the world, has grown profits 10% a year the last decade and is expected to grow profits 8% long-term in addition to paying a yield of more than 1.5%. The stock sells for 15x 2018 profit estimates, which is a good price to pay as DIS has had a median P/E of 19, 19, 21 and 17 the past four years. This is a great time for conservative investors to acquire one of America’s best franchises. |
One Year Chart |
 The Disney chart looks bad but this stock ran from $30 to $120 from Aug 2011 to Aug 2015 and needed a breather as the P/E got over 20 (that was too high). Last qtr DIS met previously lowered estimates with -2% profit growth on flat revenue growth. Qtrly profit growth was just lowered for at least the 5th straight qtr. Annual profit estimates were also slashed. But on the bright side profit growth is expected to be 8%, 8%, 6% and 11% the next 4 qtrs. That would be good. But I bet these will come down too. |
Fair Value |
 Even though estimates came down, the stock’s declined during the last six months. Combine that with us looking ahead to 2018 and my Fair Value of $110 gives this stock double-digit upside for the coming year. Disney is such a solid investment that a double-digit return owning the stock would be wonderful. |
Bottom Line |
 Walt Disney is in transition as it transforms into a company that will provide its content via digital subscriptions. Long-term, this should be a success, but investors have to accept short-term volatility in the stock as it moves according to sentiment. But with the stock now selling for just 15x 2018 profits, this is a good time for conservative investors who are the patient to make an investment in one of America’s great franchises. And honestly, the stock might run-up in anticipation of the app releases and/or Star Wars lands openings. DIS ranks 24th of 33 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 24 of 33 |
