4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 112
The Walt Disney Company (NYSE:DIS) is a Burbank, California-based diversified entertainment and mass-media company. The company has a diverse network of theme parks across the world, along with various mediums of content distribution platforms.
On November 20, The Walt Disney Company (NYSE:DIS) announced the return of former CEO Bob Iger. Mr. Iger will occupy the position for two years to navigate the company through challenging times and is expected to negotiate with Nelson Peltz’s Trian Fund Management LP. The activist hedge fund has taken a position worth $800 million in The Walt Disney Company (NYSE:DIS) following the Q4 results to pressure the company into controlling costs and give a seat on its Board.
Given Walt Disney Company’s (NYSE:NYSE:DIS) strong intellectual property (IP) portfolio and the increasing demand for theme parks, the company is anticipated to experience substantial growth in profitability. The company’s top line is expected to increase by 10.4%, while the bottom line is projected to expand by 18.8% in FY 2023, making The Walt Disney Company (NYSE:DIS) one of the best Robinhood stocks to invest in.
Third Point discussed its positive outlook on The Walt Disney Company (NYSE:DIS) in its Q3 2022 investor letter. Here’s what the firm said:
“As disclosed in our Q2 letter, we reinitiated a significant position in The Walt Disney Company (NYSE:DIS) when the company retested its Covid lows earlier this year. At the current price, Disney is trading for little more than the stand-alone value of its Parks business and a mere 15x ’24 “street” consensus. The company remains early in its Direct to Consumer (“DTC”) transition with a leading market position, and yet the current stock price ascribes negligible value to the streaming business. We believe this is due to questions around the terminal economics of streaming, given large losses being generated today at Disney (>$1 billion dollars last quarter) and stagnating margins at peers such as Netflix. On the last earnings call, management highlighted three items that could lead to an inflection in DTC profitability over the next 12 months: a 38% price increase for Disney+ in the US; moderating growth in cash content expense; and an advertising tier for Disney+ launching in two months that can drive additional ARPU given high demand for the Disney brand amongst advertisers.
While the company has guided to Disney+ achieving breakeven sometime within the fiscal year ending September 2024, the valuation suggests the market remains skeptical. Disney only trades at ~14x the $7 in earnings generated prior to the Fox acquisition, which implies investors don’t expect earnings to meaningfully exceed this figure in the coming years. Hence, the first value driver we highlighted in our last letter is the opportunity for management to optimize Disney’s cost base to drive earnings growth. We believe Disney has ample means to rationalize costs across its operating platform and deliver targeted content for home viewing that does not entail the same cost structure of exclusive theatrical releases…” (Click here to view the full text)
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