Stock (Symbol) |
Walt Disney (DIS) |
Stock Price |
$92 |
Sector |
| Retail & Travel |
Data is as of |
| October 10, 2016 |
Expected to Report |
| Nov 10 |
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 |
 The Walt Disney Company (DIS) is the world’s largest media company, and is the cheapest its been in years because profits are expected to be lackluster in 2017. Here’s how its division breakdown with percentage of revenue contributed:
DIS is under pressure as people get rid of cable, and thus ESPN as well. People can now subscribe to ESPN on a monthly or yearly basis, but that’s not enough so the cable network has reduced studio host payroll. And really, people just want to watch live sports and highlights anyway. Under Bob Iger’s leadership the company makes less films and bigger bets in tentpole films. Tentpole films work very well in China and also create merchandise sales. Thus the Consumer Products division has doubled profits the past four years. DIS had its fiscal year end September 30th and now sells for just 15x 2017 earnings estimates — one of the lowest valuations in a decade. It’s grown profits 14% a year the past decade and has an Est LTG of 11% a year plus a 1% yield. This is one of the world’s safest stocks, but the move to mobile has hurt ESPN revenue and the company is expected to have just 1% profit growth on average the next 4 qtrs. Shanghai Disney has been open four months, is doing great, and that provides growth opportunity (but DIS has to split the profits with China). Disney will be a major player in providing movies and sports digitally to your home, so the question is: Do you have the patience with DIS? This stock was $5 a share thirty years ago, $20 twenty years ago, $30 ten years ago, $120 last year, and is below $100 today. |
One Year Chart |
 Next qtr’s estimate is light for a number of reasons. Last year the company had an extra week in the 4th qtr, hurricane Matthew caused the Orlando airport to be closed two days, and ESPN revenue will likely be light from poor baseball ratings. Profit Estimates for the next 4 qtrs are -3%, -1%, 5% and 3%. No wonder the stock is down. DIS is hitting support levels here, but could break down to $80. But then it would be selling for 13x earnings and that might be too cheap. |
Fair Value |
 This safe stock is an excellent value for investors with a long-term horizon. If these estimates hold true and the stock gets a 17 P/E it will be $114 in two years which would be a gain of 24%. But in the meantime profit growth is expected to be lackluster the next four qtrs so if you’re impatient you might want to leave the stock and go where the growth is. |
Bottom Line |
 Walt Disney is a high quality Blue Chip stock many families and trust funds have held for decades or generations. The stock is a real value here at 15x earnings but with profits expected to be flat in the near future the stock doesn’t have any momentum right now, thus investors looking to grow their money now might want to step away from the stock. My take is if we sell to buy back later the stock will likely be higher when we get back in, so just be patient. DIS will rank 33rd of 35 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 33 of 35 |
