Should you buy Disney stock? (July 2023)
- 7 months ago
Disney stock analysis. DIS stock.
Discover under-the-radar stocks: https://www.overlookedalpha.com
Disney is one of the world’s most valuable brands but the stock is down over 50% from its all-time high. At the current share price the company has a valuation of 162 billion dollars. It’s got almost 14 billion in cash and 45 billion of debt so the enterprise value is 194 billion.
Revenue over the last 12 months is 87 billion, net income is 4.1 billion, while adjusted ebitda is 12.5 billion. So Disney stock is valued at 2.2 times revenue, 16 times ebitda and 40 times earnings.
Looking at a historical chart, Disney appears undervalued when compared to revenue but overvalued when compared to earnings. And there’s an obvious reason why. While Disney’s top line revenue has continued to grow in recent years, it’s profits have fallen. Disney revenue, for example, is up 47% since 2018 but net income has fallen 67%.
The main reason is that Disney’s costs have almost doubled. After launching Disney+ in 2019, significant amounts of free cash flow had to be poured into content creation. It’s not called the streaming wars for nothing as Disney is competing not only with channels like Netflix but social media platforms like YouTube and TikTok. Even with significant investment, Disney + subscribers declined 2% in the latest quarter.
Meanwhile, the shift to online streaming means that Disney has started to lose revenue from its highly profitable linear networks segment. To top it off, Disney park admissions could be nearing a post-pandemic peak.
But Disney remains a valuable franchise and the stock is already pricing in a lot of weakness. Returning CEO Bob Iger could sell some assets and if margins improve the stock has room for upside.
But it’s worth remembering that it was Iger who decided to pay over 70 billion dollars for Twentieth Century Fox in 2018, a deal that saddled the company with significant debt. That debt is now costing the company billions of dollars a year in interest payments.
#stocks #investing #disneystock #stockstowatch
Discover under-the-radar stocks: https://www.overlookedalpha.com
Disney is one of the world’s most valuable brands but the stock is down over 50% from its all-time high. At the current share price the company has a valuation of 162 billion dollars. It’s got almost 14 billion in cash and 45 billion of debt so the enterprise value is 194 billion.
Revenue over the last 12 months is 87 billion, net income is 4.1 billion, while adjusted ebitda is 12.5 billion. So Disney stock is valued at 2.2 times revenue, 16 times ebitda and 40 times earnings.
Looking at a historical chart, Disney appears undervalued when compared to revenue but overvalued when compared to earnings. And there’s an obvious reason why. While Disney’s top line revenue has continued to grow in recent years, it’s profits have fallen. Disney revenue, for example, is up 47% since 2018 but net income has fallen 67%.
The main reason is that Disney’s costs have almost doubled. After launching Disney+ in 2019, significant amounts of free cash flow had to be poured into content creation. It’s not called the streaming wars for nothing as Disney is competing not only with channels like Netflix but social media platforms like YouTube and TikTok. Even with significant investment, Disney + subscribers declined 2% in the latest quarter.
Meanwhile, the shift to online streaming means that Disney has started to lose revenue from its highly profitable linear networks segment. To top it off, Disney park admissions could be nearing a post-pandemic peak.
But Disney remains a valuable franchise and the stock is already pricing in a lot of weakness. Returning CEO Bob Iger could sell some assets and if margins improve the stock has room for upside.
But it’s worth remembering that it was Iger who decided to pay over 70 billion dollars for Twentieth Century Fox in 2018, a deal that saddled the company with significant debt. That debt is now costing the company billions of dollars a year in interest payments.
#stocks #investing #disneystock #stockstowatch