Disney’s Poor Stock Performance

 by Ray Keating

Analysis

DisneyBizJournal.com

July 18, 2024

 

There’s been a good deal of talk about the underperformance of The Walt Disney Company’s stock. Since Disney is a company that seems to get a great deal of criticism – sometimes for good reason and many times without a sound basis – DisneyBizJournal has been overdue in taking a look at the Disney stock over the long haul.

 

It's standard practice to see how a stock performs compared to the market overall. The following chart comes courtesy of PortfoliosLab.com, and it compares the Disney stock price (DIS) versus the S&P 500 Index (as captured by SPDR S&P 500 ETF (SPY)). By the way, these prices are adjusted for stock splits and dividends.

The chart goes back ten years. From July 2014 to March 2021, Disney’s stock largely went along with the S&P 500. However, since March 2021, the divergence has been stunning, with the market climbing higher and Disney declining. Over this ten-year period, as PortfoliosLab noted, “DIS has underperformed SPY with an annualized return of 2.19%, while SPY has yielded a comparatively higher 12.93% annualized return.”

 

Over the past five years (see the first chart below from PortfoliosLab.com), the S&P 500 gained 102.8 percent, while Disney declined by 29.5 percent. And over the past year, the S&P was up by 24.1 percent, with Disney experiencing a gain of 12.7 percent (the second chart is below).

Finally, what about stock performance since Bob Iger returned as CEO on November 20, 2022? The S&P has been up 40.5 percent, while Disney’s down by 34 percent.

 

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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 also own stock in Disney.

 

The Disney Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement and fun for Disney fans, including those who love Mickey, Marvel, Star Wars, Indiana Jones, Pixar, princesses and more.

 

Never miss any new book by Ray Keating by joining the Pastor Stephen Grant Fellowship with Ray Keating at

https://www.patreon.com/pastorstephengrantfellowship.

 

Various books by Ray Keating…

 

• The Pastor Stephen Grant thrillers and mysteries. There are 19 books in the series now.

 

• The Alliance of Saint Michael novels – Cathedral and Subversion – are at Amazon. 

 

• Order The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist, and The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist at Amazon.com.

 

• Signed editions of Ray’s books are at www.raykeatingbooksandmore.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Disney and Long-Term Investors Celebrate the Company Turning 100

 by Ray Keating

News/Commentary

DisneyBizJournal.com

October 2, 2023

 

October 2023 is a big month for the Walt Disney Company. It marks the company’s 100th birthday. One hundred years in business is truly amazing for any company. But with Disney, of course, we’re talking about one of the largest entertainment companies on the planet, and one that has had a historic impact on popular culture.

Specifically, it was October 16, 1923, when the brothers Walt and Roy Disney formed the Disney Brothers Studio. In 1940, Walt Disney productions issued over-the-counter stock, and later, on November 12, 1957, the company did an IPO (initial public offering) on the New York Stock Exchange at a price of $13.88.

 

Disney has announced that it will be celebrating its birthday throughout October in a variety of ways. For example, Disney+ will be decked out in a special 100 anniversary logo, and will offer a special collection of films and series from throughout the decades. And the short film Once Upon a Studio will make a broadcast debut on Sunday, October 15, during ABC’s The Wonderful World of Disney: Disney’s 100th Anniversary Celebration!

 

Also, as part of the celebration, Disney is having theatrical re-releases for The Lion King, from September 29 to October 12, and for Moana, from October 13–26.

 

There’s more about the 100th celebration here.

 

By the way, what would an investment in the Disney IPO in 1957 be worth now? Well, Benzinga.com did the calculations as of November 2022, and it concluded:

 

“Disney shares were priced at $13.88 at the time of the 1957 IPO. A $1,000 investment could have purchased 72.05 shares at the time. Over the years, Disney has completed numerous stock splits. The original 72.05 share investment would be 28,896.18 shares today after stock splits. The $1,000 investment would be worth $2,635,042.65 today, turning Disney IPO investors into millionaires if they kept the investment over the last 65 years.”

 

And when adjusted for inflation that initial $1,000 equates to about $11,000 in today’s dollars – so that’s still a fantastic return on Disney’s stock since 1957.

 

__________

 

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.)

 

Consider books by Ray Keating, including…

 

• The Pastor Stephen Grant thrillers and mysteries. There are 18 books in the series now.

 

• Order The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist. Kindle editions and paperbacks via Amazon here and signed books here. And don’t forget the first book in this growing series, i.e., The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel is at Amazon. 

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Signed editions of Ray’s books are at www.RayKeatingOnline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Points to Ponder on Disney Stock

 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.

 

__________

 

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.)

 

Consider books by Ray Keating…

 

• The Pastor Stephen Grant thrillers and mysteries. Here are 18 books in the series now with the latest being Under the Golden Dome: A Pastor Stephen Grant Novel and For Better, For Worse: A Pastor Stephen Grant Short Story.

 

• Order The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist. Kindle editions and paperbacks via Amazon here and signed books here. And don’t forget the first book in this growing series, i.e., The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

 

Investors Not Happy with Disney After Earnings Report

 by Ray Keating

Analysis

DisneyBizJournal.com

May 11, 2023

 

Well, investors aren’t seeing much magic in Disney at the moment.

 

At first glance, Disney’s earnings report released on May 10 based on the quarter ending April 1 was, at worst, mixed. Earnings per share came in as widely expected in the market, and revenue actually ran slightly ahead of where expectations were.

Courtesy of Google.com

Also, the theme parks did very well, with the company’s Disney Parks, Experiences and Products segment posting a 17 percent increase in revenue compared to the same quarter last year, while the segment’s profits grew by 23 percent.

 

And Disney’s direct-to-consumer, or streaming, losses were narrower than expected, and were moving in the direction the company said they would. DTC revenues increased by 12 percent, and operating losses went from $0.9 billion to $0.7 billion.

 

But these general positives, so far, have been outweighed by negatives now, and concerns looking ahead.

 

For example, the number of Disney+ subscribers declined by four million (from 161.8 million at the end of 2022 to 157.8 million as of April 1, 2023). Of those losses, the domestic tally was -300,000. With the loss of cricket, a big chunk of the subscriber losses came in India. ESPN subscriptions were up slightly (24.9 million to 25.3 million) and Hulu subs inched up from 48.0 million to 48.2 million). 

 

Also, Disney’s traditional television (linear) networks saw a seven percent decline in revenue and a 35 percent decline in operating income.

 

In addition, Disney is in the midst of negotiating the purchase of the remainder of Hulu from Comcast, and plans to merge Hulu content with Disney+. There’s a significant amount of uncertainty swirling around the ultimate impact this will have on Disney.

 

As for the parks, the look ahead was less robust compared to recent performance, given the possibility of a recession, with commensurate slowing of the job market, a likely post-Disney World 50th-anniversary attendance falloff, and the evaporation of a post-COVID surge. At the same time, cost pressures likely will persist, including, ironically, on the labor front. 

 

And there is uncertainty tied to the company’s lawsuit against Florida Governor Ron DeSantis and his allies in Florida government related to Walt Disney World. To say that it’s unusual for a company to sue a governor and related entities – and a governor who wants to be president – would be a major understatement. At the same time, though, Governor DeSantis’ crusade against Disney is an unprecedented act as well, and Disney has a strong case that this is government targeting a particular company and limiting or denying the right to free speech.

 

Whether one agrees or disagrees with the position that Disney took on an education law in Florida, one cannot seriously argue with what Iger said, including: “This is about one thing and one thing only, and that's retaliating against us for taking a position about pending legislation. And we believe that in us taking that position, we are merely exercising our right to free speech… There's been a lot said about special districts and the arrangement that we had, I want to set the record straight on that too. There are about 2000 special districts in Florida.” In addition, Iger asked, “Does the state want us to invest more, employ more people and pay more taxes or not?”

 

As for what might lie ahead, Investor’s Business Daily reported the following: “For the rest of the year, consensus views see the Burbank, Calif.-based company's earnings turning higher and ending up 16% for the fiscal year and up 21% (calendar year) over 2022. Fiscal year revenue is expected to rise about 9%.”

 

It also must be remembered that Disney is in the mix of some serious restructuring, trimming jobs and costs. As Iger said, “From movies to television, to sports, news, and our theme parks, we continue to deliver for consumers, while establishing a more efficient, coordinated, and streamlined approach to our operations.”

 

Disney’s stock price closed at $101.14 on May 10, before the earnings release, and then dropped by $8.84, or 8.7 percent, per share, closing at $92.30 on May 11. 

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and 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? 

 

Consider books by Ray Keating…

 

• The Pastor Stephen Grant thrillers and mysteries. You can order the latest book in the series – Under the Golden Dome: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• Pre-order The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist. Kindle edition here and signed books here. And don’t forget the first book in this growing series, i.e., The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Disney and Earnings Expectations

 by Ray Keating

Analysis

DisneyBizJournal.com

February 2, 2023

 

The Walt Disney Company will release its next earnings report for the quarter ended in December 2022 after the stock market closes on Wednesday, February 8, 2023.

 

Whether it be Disney or another publicly traded company, people often are baffled with how a company’s stock trades after earnings are announced. So, it’s important to understand what a company’s stock price reflects or captures. I explained it this way in my book The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist: 

 

[S]tock prices reflect the level of confidence in the decisions being made for the business. This provides information to current investors, to those considering investment, and to the company board in terms of management compensation being tied to performance. Indeed, this is why top management’s compensation at a company often is tied, in part, to stock options. A stock option is the right to buy a certain number of shares of a corporation at a particular price. So, if the company performs well and the stock price rises, the options will be valuable, and vice versa if the company and stock price perform poorly.

     So, the stock price is tied to the future performance – that is, earnings or cash flow – of that particular company. Of course, all kinds of factors – both internal and external to the firm – can and will affect stock prices, and expectations regarding such factors can change, sometimes quite quickly, and will differ among market participants.

 

When talking about future earnings or cash flow, expectations naturally matter in terms of a stock’s price. So, when an earnings report, and the related earnings call with top management, align with prior market expectations, the price of the stock will be little affected. And if the earnings report “beats expectations,” the stock price will rise accordingly, and in contrast, when earnings fall short of expectations, the price will fall.

 

What do market expectations look like for Disney heading into the company’s earnings report and call next week? 

 

Zacks Equity Research reports the following in a piece at Yahoo! Finance:

 

• “This entertainment company is expected to post quarterly earnings of $0.69 per share in its upcoming report, which represents a year-over-year change of -34.9%. Revenues are expected to be $23.33 billion, up 6.9% from the year-ago quarter.”

 

• “The consensus EPS estimate for the quarter has been revised 8.3% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.”

 

• “For Disney, the Most Accurate Estimate [i.e., ‘a more recent version of the Zacks Consensus EPS estimate’ with the idea being ‘that analysts revising their estimates right before an earnings release have the latest information’] is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects… On the other hand, the stock currently carries a Zacks Rank of #4. So, this combination makes it difficult to conclusively predict that Disney will beat the consensus EPS estimate.”

 

A great deal has happened since Disney’s last earnings release on November 8, including, of course, CEO Bob Chapek being fired on November 21, with Bob Iger returning to that role.

Source: Google

 

As noted in the above chart, Disney’s stock price stood at $99.90 on November 8, sank to $84.17 on December 28, and closed at $109.39 on February 1, 2023.

 

In coming days, DisneyBizJournal will look at various other factors in play influencing Disney and its stock.

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and 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? 

 

Consider books by Ray Keating…

 

• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Pastor Stephen Grant thrillers and mysteries. The latest in the series is Persecution: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

What Does the Market Like About Loeb’s Disney Buy?

 by Ray Keating

Analysis/Commentary

DisneyBizJournal.com

August 15, 2022

 

Disney’s stock price jumped this morning – up by $2.98 per share, or 2.5 percent at the time of this writing – on the news that activist Dan Loeb’s Third Point hedge fund jumped back into the stock.

 

It’s always interesting to see what makes a stock price jump around from day to day. Loeb is known for being an activist whose investments in companies often come with an accompanying letter spelling out what he thinks the company should do.

According to reports, Loeb’s letter to Disney serves up two basic ideas. First, that Disney should work to accelerate its streaming integration of Hulu with an early purchase of Comcast’s minority stake in Hulu before the contractual deadline in 2024, that is, if the price premium is reasonable. Well, okay, thanks. I’m sure Disney sees that as well, again, if the price is right.

 

And then Loeb calls for spinning off ESPN. Given the unrelenting focus of Disney CEO Bob Chapek on live sports, including sports betting, and that the company already has looked into and rejected the idea of an ESPN spinoff, do what you will with this suggestion by Loeb. It’s hard to see that ESPN, including ESPN+, is going anywhere.

 

When Loeb previously held a stake in Disney, he urged the company to invest heavily in streaming. This firm-grasp-of-the-obvious recommendation somehow earned Loeb kudos from various corners.

 

It also is worth noting the following from The Wall Street Journal: “But by the first quarter of this year, the hedge fund had completely exited its position. Mr. Loeb had become worried that it would take years for Disney’s streaming business to reap the profits needed to boost the company’s share price, a person familiar with his thinking told The Wall Street Journal in May.” It would seem then that the streaming and profits news served up last week by Disney took Loeb by surprise. But now he’s back in Disney.

 

What’s the market so excited about today regarding Loeb’s moving back into Disney? It’s unlikely that it has to do with the activist investor’s actual suggestions, and more to do with the fact that Loeb sees value in the stock as matters are being run right now.

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and 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? (Also, full disclosure: Keating owns Disney stock.)

 

Two great ways to order Cathedral: An Alliance of Saint Michael Novel, which is Ray’s sixteenth work of fiction, and the first in the Alliance of Saint Michael series. Signed paperbacks here and the Kindle edition here. 

 

Two great ways to order Ray Keating’s new nonfiction book – The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks here, and paperbacks, hardcovers and Kindle editions here.  

 

Get all of Ray Keating Pastor Stephen Grant thrillers and mysteries in paperback and for the Kindle at Amazon.com and signed books at www.RayKeatingOnline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.