Stock (Symbol)

Walt Disney (DIS)

Stock Price

$110

Sector

Retail & Travel

Data is as of

January 18, 2018

Expected to Report

Feb 6

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

Disney’s (DIS) acquiring 21st Century Fox, setting it up to become the next Netflix in subscriber content. This deal does not include the Fox, Fox Sports and Fox Business News channels, which will be spun off into a separate company. Fox will also keep the 20th Century Fox lot in Century City. Disney’s digital subscription platform is expected to debut in 2018 with ESPN and 2019 with Disney content. Now the company will have enough content to provide consumers with a subscription service like Netflix has. Walt Disney is the world’s largest media company, with four main divisions:

Media Networks (43% of 2016 sales) — ABC, ESPN, Disney Channel, ESPN Radio.
Parks & Resorts (31%) — Disneyland, Walt Disney World, Disney Cruise Line. Shanghai Disney opened in 2016.
Studio Entertainment (17%) — Disney Studios, Pixar, Marvel, Touchstone Pictures, Lucasfilm.
Consumer Products & Interactive Media (10%) — toys, apps, apparel, books, games.

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. DIS has been on the rise since this announcement took place, and since NFLX trades more on future profits than current ones, Disney stock could attain a P/E in the 20s within the next few years. This is a solid core holding for conservative investors. Note: DIS is set to report earnings after the bell today.

One Year Chart

DIS reported -3% profit growth last qtr as revenue declined 3%. Qtrly profit growth for the next qtr was just lowered for at least the 6th straight time. But on the bright side DIS did have estimates increase for future qtrs. Qtrly Estimates are 8%, 11%, 16% and 24% for the next 4 qtrs. That would be accelerating growth.

Fair Value

My Fair Value on DIS is a P/E of 19, which gives the stock good upside for the next two years. And I might take this Fair Value up to a P/E between 20 and 25 in the coming qtrs.

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 in regards to the streaming service. DIS ranks 17th of 32 stocks in the Conservative Portfolio Power Rankings.