by Ray Keating
News/Analysis
DisneyBizJournal.com
August 28, 2023
The Walt Disney Company faces assorted challenges, and that’s been reflected recently in the decline in the company’s stock price.
What to think? Well, the following are the most interesting points that we’ve read in recent days in the media and from analysts regarding Disney…
An August 28 Forbes report noted:
• “Disney traded at about $84 Monday, hovering at its lowest level since October 2014, the last time they closed below $84 until last Thursday.”
• “Since October 2014, Disney’s 12% return compares to a roughly 130% jump for the S&P 500, while Disney’s 25% loss over the last five years and 55% gain over the last 10 years compares to the S&P’s 53% and 170% respective gains over the periods, according to FactSet data.”
• “Disney, whose earnings before interest, taxes, depreciation and amortization dwindled from $17.4 billion in 2018 to $11.5 billion last year, has suffered from a broad decline in profitability in linear television: Disney’s 55% return over the last decade compares favorably to similarly exposed stocks like CBS parent Paramount (down 57%) and HBO and CNN parent Warner Bros. Discovery (down 68%).”
• “‘Mickey is going on a diet and losing weight,’ Daiwa analyst Jonathan Kees wrote in a note to clients earlier this month. With the Iger-led recalibration on bottom lines, Disney will be a ‘survivor and winner in the streaming wars,’ Kees proclaimed.”
From TheStreet.com on August 26:
• CEO Bob Iger “must also figure out a business model for ESPN as the cable universe collapses and the company loses hundreds of millions of dollars each month it used to collect from cable companies. Add in the company's political battles in Florida, questions about the cost of content for the Disney+ streaming service, and general economic concerns hurting theme park attendance and you can see why people have become wary of owning Disney stock. Those people are wrong.”
• “Disney's biggest problem is that it needs to figure out how to properly monetize its content. People have not become less interested in good storytelling in movies and television shows nor have they decided to stop watching top-tier sporting events. They have, however, decided that most movies aren't worth leaving the house for and, people who don't watch sports, have gladly walked away from the cable bundle. That has put Disney in a position where Iger needs to completely reimagine how the company produces and monetizes content.”
• “It may take a few years, but at the end of the day, IP matters, and no company equals Disney when it comes to owning franchise properties.”
From a MotleyFool.com report on August 23:
• “Revenue from the direct-to-consumer streaming business rose by 9% to $5.5 billion, and its loss narrowed from $1.1 billion in the prior-year period to $512 million. Average revenue per subscriber at Disney+ grew by 2% to $6.58. Still, management will increase prices for its streaming services for the second time in less than a year. While other streamers have made similar moves in their attempts to achieve profitability, raising prices and placing more ads in their shows and movies risks alienating subscribers, like cable companies once did.”
From a Nasdaq.com report on August 27 noting another Motley Fool report:
• “The good news is that Disney has shown steady improvement over the last several quarters, which gives some hope to shareholders that the worst is behind the company. For example, the parks and experiences segment, which is made up of all the domestic and international theme parks, cruises, and other attractions, grew revenue by 13% year over year in the most recently reported quarter. Operating income in this segment increased by 11%. While the media and entertainment segment has seen its revenue decline sequentially over the last three quarters, its operating income has been improving. More important is the approximately $1 billion improvement in operating income in the direct-to-consumer business.”
Always keep in mind that stock price is based on future earnings or cash flow. The key then isn’t what’s happened at Disney, but what lies ahead. Right now, there are many questions, but there is an underlying, long-term strength to the company, given its IP, parks and resorts, movie studio, and streaming services. But you still need the right people – from leaders to creatives to managers to imagineers to budgeteers – in place to make it all work.
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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, the Alliance of Saint Michael novels, and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.
The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? (Keating is a Disney shareholder.)
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