Is Disney Stock a Buy Near its 10yrs Low?

Summary

The 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.