Should you buy Disney stock? (July 2023)
Disney stock analysis. DIS stock.
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Disney is one of the world’s most valuable brands but the stock is down over 50% from its all-time high. At the current share price the company has a valuation of 162 billion dollars. It’s got almost 14 billion in cash and 45 billion of debt so the enterprise value is 194 billion.
Revenue over the last 12 months is 87 billion, net income is 4.1 billion, while adjusted ebitda is 12.5 billion. So Disney stock is valued at 2.2 times revenue, 16 times ebitda and 40 times earnings.
Looking at a historical chart, Disney appears undervalued when compared to revenue but overvalued when compared to earnings. And there’s an obvious reason why. While Disney’s top line revenue has continued to grow in recent years, it’s profits have fallen. Disney revenue, for example, is up 47% since 2018 but net income has fallen 67%.
The main reason is that Disney’s costs have almost doubled. After launching Disney+ in 2019, significant amounts of free cash flow had to be poured into content creation. It’s not called the streaming wars for nothing as Disney is competing not only with channels like Netflix but social media platforms like YouTube and TikTok. Even with significant investment, Disney + subscribers declined 2% in the latest quarter.
Meanwhile, the shift to online streaming means that Disney has started to lose revenue from its highly profitable linear networks segment. To top it off, Disney park admissions could be nearing a post-pandemic peak.
But Disney remains a valuable franchise and the stock is already pricing in a lot of weakness. Returning CEO Bob Iger could sell some assets and if margins improve the stock has room for upside.
But it’s worth remembering that it was Iger who decided to pay over 70 billion dollars for Twentieth Century Fox in 2018, a deal that saddled the company with significant debt. That debt is now costing the company billions of dollars a year in interest payments.
#stocks #investing #disneystock #stockstowatch
Discover under-the-radar stocks: https://www.overlookedalpha.com
Disney is one of the world’s most valuable brands but the stock is down over 50% from its all-time high. At the current share price the company has a valuation of 162 billion dollars. It’s got almost 14 billion in cash and 45 billion of debt so the enterprise value is 194 billion.
Revenue over the last 12 months is 87 billion, net income is 4.1 billion, while adjusted ebitda is 12.5 billion. So Disney stock is valued at 2.2 times revenue, 16 times ebitda and 40 times earnings.
Looking at a historical chart, Disney appears undervalued when compared to revenue but overvalued when compared to earnings. And there’s an obvious reason why. While Disney’s top line revenue has continued to grow in recent years, it’s profits have fallen. Disney revenue, for example, is up 47% since 2018 but net income has fallen 67%.
The main reason is that Disney’s costs have almost doubled. After launching Disney+ in 2019, significant amounts of free cash flow had to be poured into content creation. It’s not called the streaming wars for nothing as Disney is competing not only with channels like Netflix but social media platforms like YouTube and TikTok. Even with significant investment, Disney + subscribers declined 2% in the latest quarter.
Meanwhile, the shift to online streaming means that Disney has started to lose revenue from its highly profitable linear networks segment. To top it off, Disney park admissions could be nearing a post-pandemic peak.
But Disney remains a valuable franchise and the stock is already pricing in a lot of weakness. Returning CEO Bob Iger could sell some assets and if margins improve the stock has room for upside.
But it’s worth remembering that it was Iger who decided to pay over 70 billion dollars for Twentieth Century Fox in 2018, a deal that saddled the company with significant debt. That debt is now costing the company billions of dollars a year in interest payments.
#stocks #investing #disneystock #stockstowatch
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NewsTranscript
00:00 Disney is one of the world's most valuable brands but the stock is down over 50% from
00:05 its all time high. At the current share price the company has a valuation of $162 billion.
00:11 It's got almost $14 billion in cash and $45 billion of debt so the enterprise value is $194
00:18 billion. Revenue over the last 12 months is $87 billion, net income is $4.1 billion while adjusted
00:25 EBITDA is $12.5 billion. So Disney's stock is valued at 2.2 times revenue, 16 times EBITDA
00:32 and 40 times earnings. Looking at a historical chart Disney appears undervalued when compared
00:38 to revenue but overvalued when compared to earnings and there's an obvious reason why.
00:43 While Disney's top line revenue has continued to grow in recent years,
00:47 its profits have fallen. Disney revenue is up 47% since 2018 but net income has fallen 67%.
00:55 The main reason is that Disney's costs have almost doubled. After launching Disney+ in 2019
01:01 significant amounts of free cash flow had to be poured into content creation. It's not called
01:06 the streaming wars for nothing as Disney is competing not only with channels like Netflix
01:11 but social media platforms like YouTube and TikTok. Even with significant investment Disney+
01:17 subscribers declined 2% in the latest quarter. Meanwhile the shift to online streaming means
01:23 that Disney has started to lose revenue from its highly profitable linear network segment.
01:28 To top it off, Disney park admissions could be nearing a post pandemic peak. But Disney remains
01:34 a valuable franchise and the stock is already pricing in a lot of weakness. Returning CEO Bob
01:40 Iger could sell some assets and if margins improve the stock has room for upside. But it's worth
01:46 remembering that it was Iger who decided to pay over $70 billion for 20th Century Fox in 2018,
01:53 a deal that saddled the company with significant debt. That debt is now costing the company
01:58 billions of dollars a year in interest payments. Let's assume Disney can grow revenue 5% a year
02:04 for the next 10 years, get net income margin back to 10% and then trade at a 20 times multiple
02:10 to earnings. In that scenario the company would be worth around $280 billion, which works out to an
02:16 investment return of only 5.6% a year. Sooner or later Disney stock will see a bounce but right
02:23 now the company has too many negative forces converging at one time. I give it a neutral rating
02:30 but these are my personal opinions not financial advice and I've got no position in Disney stock.
02:35 For more detailed investing ideas make sure to visit our website overlookedalpha.com