Is Disney Stock a Buy Near its 10yrs Low?

The Patient Investor
29 Jul 202408:55

Summary

TLDRThe video discusses Disney's stock performance, noting its 37% decline over five years and recent 26% dip from its 52-week high. Despite improvements in earnings and free cash flow, the stock is down, trading at a low multiple. The presenter explores whether this presents a buying opportunity, considering the company's business model, direct consumer growth, and balance sheet challenges. Ultimately, they find better investment opportunities elsewhere.

Takeaways

  • 📉 Disney's stock has decreased by 37% over the last 5 years, leading to a lot of discussion and negative feedback among investors.
  • 📈 Despite being down, Disney's stock rose by 54% previously, and the recent drop is 26% from its 52-week high, prompting questions about whether it's a buying opportunity.
  • 🎢 Disney's business model includes revenue from sports (ESPN), entertainment, and experiences like Disneyland and Disney World, with the latter being a segment that some investors dislike due to low margins but high customer loyalty.
  • 💸 An article cited in the script reveals that 45% of parents take on debt to afford Disney vacations, highlighting the strong demand for Disney's theme parks and cruises.
  • 🏰 Disney is investing heavily in its theme park business, with plans to increase investments to $60 billion in 2023, despite it not being the most profitable segment.
  • 📊 Disney's last earnings report showed that they beat expectations on EPS but slightly missed on revenue, with guidance for revenue growth being lowered but still on track for 2024.
  • 💰 The company is expected to generate around $8 billion in free cash flow in fiscal year 2024, a significant increase from the $1 billion in 2022 and close to the $5 billion in 2023.
  • 📈 Disney Plus is showing signs of improvement, with an increase in subscribers and profitability, marking the first time the direct-to-consumer division has made an operating profit.
  • 💳 Disney's balance sheet is not in the best shape, with a significant amount of debt relative to its cash position, but the company is generating enough free cash flow to potentially pay off some debt.
  • 📉 The stock's current trading price is influenced by a market multiple that has decreased from 25 times earnings to 17.5 times, which is considered low for a legacy brand like Disney.
  • 🤔 The script suggests that while Disney may not be a 'buy' for the content creator due to better opportunities elsewhere, it could be considered at a price not exceeding the 52-week low of around $83 per share.

Q & A

  • Why is Disney considered one of the most hated stocks in the stock market?

    -The script mentions that Disney is down 37% over the last 5 years, which has led to a lot of negative feedback and comments, making it one of the most hated stocks.

  • What was the author's stance on Disney last year?

    -The author was bullish on Disney last year, and the stock went up by 54%.

  • How much has Disney's stock price fallen from its 52-week high?

    -Disney's stock price has fallen 26% from its 52-week high.

  • What is Disney's business model according to the script?

    -Disney's business model includes making money from sports like ESPN, entertainment, and experiences such as Disneyland, Disney World, cruise lines, and other businesses.

  • Why do some people consider Disney's theme parks business a 'hated segment' of its business model?

    -The theme parks business is considered a 'hated segment' because it has low margins and high capital expenditures, which some investors find unattractive.

  • What percentage of parents take on debt for Disney vacations according to the article mentioned in the script?

    -According to the article mentioned, 45% of parents take on debt to afford Disney vacations.

  • What was Disney's financial performance in their last earnings report?

    -Disney beat estimates on EPS with $1.21 versus $1.10, slightly missed on Revenue, and lowered guidance a bit for Revenue growth, but overall, things are on track for 2024.

  • What is Disney's projected free cash flow for fiscal year 2024?

    -Disney is projected to generate around $8 billion in free cash flow for fiscal year 2024.

  • How has Disney Plus performed in terms of subscriber growth and profitability?

    -Disney Plus has improved, growing from 6.3 million to 8 million subscribers domestically, and for the first time, the direct-to-consumer business made a profit of $47 million in operating income.

  • What is Disney's current balance sheet situation?

    -Disney's balance sheet is not in good shape, with around $6.6 billion in cash and cash equivalents and total debt close to $60 billion.

  • What is the current price-to-earnings (P/E) ratio for Disney, and how does it compare historically?

    -Disney's current P/E ratio is 17.5, which is low compared to historical levels of 20 to 25 times earnings.

  • What is the author's opinion on whether Disney stock is a buy at the current price?

    -The author believes that Disney is not a buy at the current price, as they find better opportunities in the market, but suggests that a price around the 52-week low of $83 per share would be fair.

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Disney StockInvestment AnalysisMarket TrendsFinancial ReviewStock PerformanceBusiness ModelEarnings ReportFree Cash FlowDisney PlusValue Trap
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