Disney stock price analysis going into 2019

Author: Ruban
Sector: Entertainment
Industry: Consumer Cyclical

Company description:

Walt Disney Co, together with its subsidiaries is a diversified worldwide entertainment company with operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media.

Walt Disney Revenue segments:

In Year ending 2018, the company brought in total revenue of $59.434 billion which is 8% YoY growth and income before income taxes is of $14.729 billion, which is around 6.8% YoY growth.

The Media Networks business brought in total revenue of $24.5 billion with 4% YoY growth, Parks and Resorts business added $20.296 billion to total revenue with 10% YoY growth, Studios Entertainment business added $9.987 billion to total revenue with whopping 19% YoY growth and finally their Consumer Products & Interactive Media business added 4.651 billion dollars to total revenue with 4% decline YoY.

Revenue from different businesses in billions Revenue by different business in billions

Disney's income split up:

The operating income of Media Networks business is $6.625 billion, which has declined by 4% YoY, Parks and Resorts business operating income is $4.469 billion, which has increased by 18% YoY, Studio Entertainment business operating income is $2.980 billion exuding 27% growth YoY, and Consumer Products & Interactive Media operating income is $1.632 billion declining 6% YoY.

Operating income by different business in billions Operating income by different business in billions

Disney's acquisition of 21st century fox:

In the middle of March this year Disney completed its acquisition of 21st Fox century with a total transaction value of approximately $71 billion.

The acquisition of 21st Century Fox’s iconic collection of businesses and franchises will allow Disney to provide more appealing high-quality content and entertainment options to meet growing consumer demand; increase its international footprint; and expand its direct-to-consumer offerings, which include ESPN+ for sports fans, the highly-anticipated Disney+ streaming video-on-demand service launching in late 2019; and Disney and 21st Century Fox’s combined ownership stake in Hulu.

The acquisition is expected to be accretive to Disney earnings per share before the impact of purchase accounting for the second fiscal year after the close of the transaction, and to yield at least $2 billion in cost synergies by 2021 from operating efficiencies realized through the combination of businesses.

Disney+:

The Company has been talking about plans to start a Netflix-style streaming service for two years. On Aprill 11 came the big reveal.

Disney Plus will cost $7 a month and arrive on Nov. 12. (Netflix’s cheapest plan is $9, and its standard plan is $13.) Disney said it intended to roll out the streaming service in Europe and Asia starting next year. It expects subscribers to total 60 million to 90 million by 2024.

In its first year, Disney Plus will offer ten original films and 25 original series, including three “Avengers” spinoffs. Disney announced that all 30 seasons of “The Simpsons” would be available on Day One, along with nearly all the “Star Wars” movies, the entire Pixar library and family-focused movies and shows from its Fox library like “The Sound of Music” and “Malcolm in the Middle.”

Upcoming movies:

Disney will dominate the box office next weekend with Thursday's debut of Avengers: Endgame. Which is expected to be the year's biggest winner at the box office and the balance are betting on Star Wars: The Rise of Skywalker as the top draw when it debuts in December.

Disney isn't resting between the two releases. There will be Toy Story 4 in June, The Lion King reboot in July, and Frozen 2 in November. Disney already has this year's highest-grossing film in Captain Marvel. By the end of the year, it could have five and possibly six of this year's biggest winners at the box office.

Disney's stock price:

Disney's stock price is trading at around $132 which is close to 52 week's high of $132.87, and the current stock price is around 34% higher than 52 week's low of $97.68. The P/E ratio of Disney stands at 18.16.

Considering the acquisition of 21st-century fox and launch of Disney + later this year, we could expect positive growth in Disney stock in the coming months.


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