DIS - Embedded Expectations Analysis - 2021 01 14
The Walt Disney Company (DIS:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 65.3x Uniform P/E, implying that the market has bullish expectations. Although management's concerns about Disney park restrictions, their business reorganization, and cost cuts at ESPN suggest the potential for near-term headwinds, market expectations remain far too pessimistic, and equity outperformance is likelySpecifically, management may have concerns about Disney amusement park shutdowns and restrictions, the sustainability of hotel bookings and reservations, and short-term headwinds for sports viewership. In addition, they may be overstating the potential of their long-term growth investments, the ability of their reorganization to streamline processes and align the organization with strategic objectives, and the prospects of their Direct-to-Consumer (DTC) business. Furthermore, they may lack confidence in their ability to deliver high-quality Disney+ content, launch Disney+ in India, and maintain their liquidity position. Additionally, they may be exaggerating their ability to cut costs in their ESPN segment
Although management's concerns about Disney park restrictions, their content and distribution business reorganization, and ESPN cost cuts suggest the potential for near-term headwinds, market expectations remain far too pessimistic given the firm's diverse growth drivers post-Fox acquisition. As such, 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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