Should you buy Disney stock (Feb 2023)
For more detailed investing ideas visit: https://www.overlookedalpha.com
Despite an aggressive push into streaming, a recent price hike has cost the company subscribers.
As of last quarter, total number of Disney Plus subscribers had fallen 1% to 161.8 million and the segment posted a 1-billion-dollar loss.
Meanwhile, linear networks, saw a 16% decrease in profits to 1.26 billion.
That decline is not surprising as consumers turn to online streaming services and under returning CEO Bob Iger, Disney plans to “transform its business” by reducing costs, cutting jobs and restructuring its business model.
Right now, the company is valued around 3 times revenue or 21 times EBITDA. That multiple would be acceptable if Disney’s streaming service was showing growth. Even at break even it would add an extra billion dollars to bottom line earnings.
However, the online streaming industry, is fiercely competitive and the high cost of content means it may not be as profitable as once thought.
Overall, Disney is a quality brand and an attractive opportunity at the right price. But the price right now isn’t low enough. That’s why I give the stock a neutral rating.
But these are my personal opinions not financial advice and I do own a small amount of Disney stock. For more detailed investing ideas visit our website overlookedalpha.com
Despite an aggressive push into streaming, a recent price hike has cost the company subscribers.
As of last quarter, total number of Disney Plus subscribers had fallen 1% to 161.8 million and the segment posted a 1-billion-dollar loss.
Meanwhile, linear networks, saw a 16% decrease in profits to 1.26 billion.
That decline is not surprising as consumers turn to online streaming services and under returning CEO Bob Iger, Disney plans to “transform its business” by reducing costs, cutting jobs and restructuring its business model.
Right now, the company is valued around 3 times revenue or 21 times EBITDA. That multiple would be acceptable if Disney’s streaming service was showing growth. Even at break even it would add an extra billion dollars to bottom line earnings.
However, the online streaming industry, is fiercely competitive and the high cost of content means it may not be as profitable as once thought.
Overall, Disney is a quality brand and an attractive opportunity at the right price. But the price right now isn’t low enough. That’s why I give the stock a neutral rating.
But these are my personal opinions not financial advice and I do own a small amount of Disney stock. For more detailed investing ideas visit our website overlookedalpha.com
Transcript
00:00 Should you buy Disney stock? Disney stock has gained 24% so far in 2023 taking the market
00:06 cap to $201.6 billion. With $8.5 billion in cash and $45 billion in long term debt the
00:14 enterprise value is around $254 billion. Latest Disney earnings showed better results than
00:20 expected. Total revenue for last quarter was $23.5 billion an increase of 8% and diluted
00:28 earnings per share was $0.99 versus an expected $0.78. Right now Disney drives revenue from
00:35 three main segments. Entertainment, linear networks and parks and experiences. Parks
00:41 and experiences continues to fire on all cylinders posting a 25% increase in net profit. But
00:48 linear networks and streaming continue to face challenges. Despite an aggressive push
00:53 into streaming a recent price hike has cost the company subscribers. As of last quarter
00:59 total number of Disney+ subscribers had fallen 1% to 161.8 million and the segment posted
01:06 a $1 billion loss. Meanwhile linear networks saw a 16% decrease in its profits to $1.26
01:14 billion. That decline is not surprising as consumers plug in to online streaming services.
01:20 So under returning CEO Bob Iger Disney plans to transform its business by reducing costs,
01:26 cutting jobs and restructuring its business. Right now the company is valued around 3 times
01:31 revenue or 21 times EBITDA. That multiple would be acceptable if Disney's streaming
01:36 service was showing growth. Even at break even it would add an extra billion dollars
01:40 to bottom line earnings. However the online streaming industry is fiercely competitive.
01:46 The high cost of content means it may not be as profitable as once thought. Overall
01:51 Disney is a quality brand and an attractive opportunity at the right price. But this price
01:56 isn't it. I don't think there's enough marginal safety here. That's why I give
01:59 the stock a neutral rating. But these are my personal opinions not financial advice
02:03 and I do own a small amount of Disney stock. For more detailed investing ideas visit our
02:08 website overlookedalpha.com