1 Growth Stock Down 52% to Buy Right Now

Summary

The video explores Disney's stock performance, noting a 44% drop in the last three years and a 15.69% increase over ten. Despite brand strength, Disney faces challenges from self-inflicted damage, pandemic impacts, and inflation. However, the streaming platform, Disney+, shows promise with early success, though profitability concerns linger. The video discusses internal changes, content strategy shifts, and financial metrics like a forward PE of 18.4 times and an average analyst price target of $111, suggesting an 18.22% upside. It also covers subscriber growth, upcoming earnings, and the potential impact of new parks on the stock's future.

Takeaways

• 💼 Disney's stock has struggled in the past few years, with a 44% drop in the last three years and a modest 15.69% growth over the past decade.
• 🌍 Disney remains one of the most loved global brands despite challenges such as political controversies, inflation, and pricing out portions of its fan base.
• 🎢 The parks were a strong revenue stream but have recently shown weakness, while streaming services like Disney+ are growing but remain unprofitable.
• 📉 Despite the challenges, Disney has a market cap of $170.7 billion and a forward PE ratio of 18.4, making it appear neither overly expensive nor cheap.
• 📺 Disney is adjusting its content strategy, reducing the volume of superhero movies and TV shows to focus on quality after feedback on oversaturation and declining performance.
• 🛑 Analysts project slight revenue growth for Disney, with forecasts of 5.75% year-over-year growth in the next quarter, but quarter-over-quarter declines of 3%.
• 💰 Disney’s free cash flow over the last 12 months was $8 billion, and it's expected to grow at a rate of 7.35% annually in the coming years.
• 📈 Revenue is expected to grow modestly, with predictions of 2.6% in 2024, 4.4% in 2025, and 4.5% in 2026.
• 🎬 Disney's streaming business, while growing, has seen mixed success with Disney+ subscribers peaking in Q3 2022 and slow recovery since.
• 🔮 Some analysts view Disney as undervalued at current prices, with projections suggesting potential upside of up to 56% based on future cash flow and earnings estimates.

Q & A

What are some of the key factors affecting Disney's stock performance over the last few years?

Key factors include self-inflicted damage from political controversies, the impact of the pandemic on its parks, inflation, increased park ticket prices, and the unprofitability of Disney's streaming platform, Disney+.

How has the Disney+ platform influenced the company's stock performance?

Disney+ initially boosted the stock due to early success, but its unprofitability has since contributed to a decline in the stock’s performance.

What changes has Disney made in response to recent challenges in its entertainment sector?

Disney has begun slowing down the release of superhero movies and TV shows, focusing more on quality over quantity in response to the perceived overload of content, particularly from Marvel.

What is the current state of Disney's Parks division?

Disney's parks have seen revenue recovery since the pandemic, but higher ticket prices are pricing out parts of its fan base. Parks are also facing competition from Universal’s new park, Epic Universe, which could impact future growth.

What is the projected growth for Disney’s revenue and free cash flow in the next few years?

Disney’s revenue is expected to grow by 2.6% in 2024, 4.4% in 2025, and 4.5% in 2026. Free cash flow is expected to grow at an annual rate of 7.35% during this period.

What are analysts expecting for Disney’s stock price in the next 12 months?

Analysts have set an average price target of $111, representing an 18.22% upside from the current price.

How has Disney+ subscriber growth trended since its launch?

Global Disney+ paid subscribers have grown at a compound annual growth rate of 21.67% since Q3 2020, but the number peaked in Q3 2022 and has since declined slightly.

What role does automation play in Disney’s advertising strategy?

Disney is working to automate 75% of its advertising business by 2027, which has already started showing success by increasing streaming ad revenue and accelerating spending on programmatic ad transactions.

What potential downside risks are analysts identifying for Disney’s Parks division?

Analysts from Raymond James point out that Disney’s parks are facing headwinds, including slowing attendance, increased competition from Universal, and the rising cost of park visits, which could limit upside potential.

Is Disney’s stock currently considered undervalued?

Based on the analysis of current data, including free cash flow growth rates and expected earnings, Disney’s stock is considered undervalued, with an implied growth rate of just 1.6% required to justify today’s price.