4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 99
The Walt Disney Company (NYSE:DIS) is one of America’s largest mass media and entertainment conglomerates. The company used to publish several Disney and non-Disney games through its Disney Interactive Studios, Inc. division. The division closed down in 2016 and now The Walt Disney Company (NYSE:DIS)’s video games division is handled by Disney Entertainment.
On April 24, Wells Fargo analyst Steven Cahall reaffirmed an Overweight rating on The Walt Disney Company (NYSE:DIS)’s shares and raised the price target to $147 from $141. The analyst expects the company to reach $100 billion in revenue through Disney+, Hulu, and ESPN.
Due to the economic slowdown, The Walt Disney Company (NYSE:DIS) is laying off employees to save costs. The company is looking to lay off 7,000 employees in the current year. In February’s earnings call, The Walt Disney Company (NYSE:DIS)’s CEO, Bob Iger said that the company is targeting $5.5 billion in cost savings.
VGI Partners Global Investments Limited made the following comment about The Walt Disney Company (NYSE:DIS) in its 2022 annual investor letter:
“The Walt Disney Company (NYSE:DIS) is a diversified media conglomerate operating media networks, theme parks, film and TV studios and direct-to-consumer streaming services. It is the global leader in theme parks with hotels and cruise lines aimed at families. Key assets within Disney are the instantly recognisable entertainment franchises that have multiple avenues of monetisation such as Mickey Mouse, Star Wars, ABC and Marvel’s Avengers.
Disney’s share price declined due to a number of factors in 2022, presenting us the chance to purchase a long-admired business and its unique collection of valuable intellectual property assets at what we consider to be a very attractive valuation. Summarily, the EPS of Disney has declined from US$7 in 2018 to ~US$2.60 in 2022 but we believe that the earnings power of the assets has not diminished to anywhere near this extent.
Disney is currently undergoing a business transition within the Media and Entertainment Distribution division (DMED) from traditional media property distribution via third parties (i.e. cinemas and broadcast networks) to a Direct-To-Consumer (DTC) model via the Disney+ streaming service. A key element of our thesis is that the earnings power of the company is currently being masked by the marketing and content investments within Disney+ and that this will normalise over the next several years. To put this in perspective, Disney+ (DTC sub-segment) currently generates operating losses of over US$3.3bn (a negative 14% operating margin) compared to operating margins at its nearest streaming competitor, Netflix, of +15.5%…” (Click here to read the full text)
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