Behind the Ears: Disney Stock Analysis

Disney (ticker: DIS) is one of the most discussed stocks in recent weeks and months. I have researched, and evaluated the stock in great depth. Big name. Big stock. Big company. Down 58% from the highs of 2021. Let us briefly discuss.

I am yet to pull the trigger, you may wonder as to why?

To best evaluate a stock, well, we need to address the bulls and bears in the room, without bias of course.

Relative Valuation📈

- Trading at a multiple of 17.6x its forward earnings, whereas the average PE on a forward basis of the S&P500 is 18.8. Significance? It is trading at a discount to the wider market.

- On top of this, historically $DIS has traded at a 20% premium to the wider market, so if it were to be trading at this premium in todays market, it could be argued that the stock should be trading at roughly 22x its earnings.

So in theory Disney appears to be trading at a discount. But why has the market enabled it to trade at a discount?📉

1. Consumer level (is there growth or decline in revenue and sales?)

2017 Revenue: $55bn

2022 Revenue: $82bn

TTM Revenue: $89bn

Revenue and sales growing? ✅

2. Metrics📐

Pre-pandemic Operating Profit: $14bn

TTM Operating Profit: $4.5bn

2017 OP Margin: 25%

TTM OP Margin: 5%

Free Cashflow per share is a useful indicator when revealing how good a company is at turning revenue into free cashflow and profit…

2017 Free Cashflow per share: $5.53

TTM Free Cashflow per share: $1.56

From these metrics we can see increasing revenue, but declining profitability…

Two words explain this.

Streaming Wars.

Disney’s streaming services: Disney+ (146m subs), Hulu, ESPN.

Despite dominance, they are doing it with razor thin margins, and face stern competition with Netflix, Amazon, Apple, and even Alphabet through Youtube.

Disneys solution? Increase prices, increase advertisement.

But how will consumers react to this?🤔

Disney in 2023 is the not the same Disney we had in 2018.

Thanks for reading.

Sources:

Investing Alpha

Yahoo Finance

Stockopedia

Mitto Markets

Not Financial Advice.