The Walt Disney Company: Investing Strategies for 2019.

The Walt Disney Company is a U.S. conglomerate that operates in four business segments:

  • Media Networks
  • Parks and Resorts
  • Studio Entertainment
  • Consumer Products and Interactive Media. (1)

The firm’s largest market is “U.S. and Canada” with 76% of total revenue.

Walt Disney’s history

Walt Disney was founded in 1923 by Walt and Roy O. Disney. It was initially called “Disney Brothers Cartoon Studio”. The company has had only 6 CEOs in 90 years; this longevity allows us to call each of their tenures an era. The current one started in 2005, when Robert A. Iger was appointed CEO. His mandate has been characterized by a string of billionaire acquisitions such as:

  • Pixar (producing firm: Toy Story, Finding Nemo, etc.) for $7.4 billion in 2006
  • Marvel Entertainment (Avengers, Iron Man, Spider Man, etc.) for $4.24 billion in 2009
  • Lucasfilm (Star Wars) for $4.05 billion in 2012
  • 21st Century Fox (Simpsons, X-Men, etc.) for $71.3 billion in 2018.

In the summer of 2017, the company acquired the majority ownership of BAMTech, a streaming technology business.The firm launched a sport-focused streaming service called ESPN+ in 2018, and is planning to launch a Disney-branded streaming service called Disney+, with the company’s movie and television content, for 2019. Moreover, management have announced their intention to pull Disney’s video content from Netflix.

Walt Disney’s financials

The company’s revenue has increased by almost 60% in the last 10 years.

Disney’s diversified business portfolio produces constantly growing EBIT and net income. Net income for 2018 is around $12.6 billion. For the same period, net margin is around 21%, a very high value that reflects the high profitability of the media and entertainment sectors.

Disney’s stock performance

Disney’s share price has moved sideways in the past three years.

Netflix’s stock has strongly outperformed Disney in the past few years. In 2018, Netflix temporarily crossed Disney by market value. The streaming company’s growth has alarmed Disney’s management, causing them to accelerate the launch of its video-streaming platform.

The U.S. media industry is consolidating. This will reduce competition and, consequently, cause a rise in costs for customers. In fact, someone who wants access to a complete library of movies and TV series content is now obliged to subscribe to many streaming services such as Netflix, Amazon Prime and HBO; and from 2019, Disney+ as well.

Disney: investing strategies for 2019

Disney is a company in the mature stage of its life cycle. It produces a lot of value but its revenue growth is slow. The company has consistently paid dividends in the past years, and even though the dividend yield is below average, its growing trend makes it a good candidate for a dividend-focused stock portfolio.

The stock price’s sideways trend in a quite narrow range makes the company an unattractive target for day and swing trading.

Trivia

Walt Disney’s first firm, “Laugh-O-Gram Studio”, went bankrupt in 1923. Right after, Disney moved to Hollywood where, along with his brother, he founded “Disney Brothers Cartoon Studio”. This was renamed “The Walt Disney Company” in 1986.

What do you think about Disney’s future? Let me know in the comment section below.

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Check out my book: A Beginners’ Guide to Stock Investing.

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References

1. https://www.thewaltdisneycompany.com/investor-relations/. [Online]

2. https://en.wikipedia.org/wiki/The_Walt_Disney_Company. [Online]

3. https://www.thewaltdisneycompany.com/new-star-wars-and-marvel-series-announced-for-disney-streaming-service/. [Online]

4. https://en.wikipedia.org/wiki/The_Walt_Disney_Company. [Online]

 

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