DIS - Embedded Expectations Analysis - 2020 05 26
The Walt Disney Company (DIS:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 37.3x Uniform P/E. Even at these levels, the market has bearish expectations for the firm. Although management's concerns about movie assets, park capacity, and costs suggest the potential for near-term headwinds, market expectations are too bearish, and equity outperformance is likelySpecifically, management may have concerns about the financial impact of coronavirus, the FX network launch on Hulu, and the number of operating screens and movie showtimes in July. In addition, they may lack confidence in their ability to meet targeted park capacity levels and keep parts of their creative pipeline active. Furthermore, they may be concerned about Shanghai Disney Resort's government-imposed capacity limit, the limited visibility into the timing of the reopening of their other parks and resorts, and higher programming and production costs at ESPN
Although management's concerns about movie assets, park capacity, and costs suggest the potential for near-term headwinds, given its diverse growth drivers, including streaming services, market expectations remain far too bearish, and longer-term equity outperformance is likely warranted for DIS
Walt Disney is an entertainment company. The company's segments are: Media Networks, which includes domestic cable networks, broadcast television network and domestic television stations, and television production and distribution; Parks, Experiences and Products, which includes theme parks and resorts, and consumer products operations; Studio Entertainment, which includes motion picture production and distribution, music production and distribution, and post-production services; and Direct-to-Consumer and International, which includes international television networks and channels, direct-to-consumer streaming services, and other digital content distribution platforms and services.
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