DIS - Embedded Expectations Analysis - 2021 09 07
The Walt Disney Company (DIS:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 45.7x Uniform P/E, implying bullish expectations for the firm. However, although management's concerns about Disney+ growth, park disruptions, and movie release timing suggest the potential for near-term headwinds, market expectations are still too pessimistic, and long-term equity outperformance remains likely.Specifically, management may lack confidence in their ability to sustain Disney+ ARPU growth, strong Disney+ engagement and retention, and Hulu advertising revenue growth. In addition, they may have concerns about disruptions to their international park operations and movie release schedules, the launch of the Shang-Chi and Free Guy titles, and the sustainability of low churn rates on Disney+ services. Furthermore, management may lack confidence in their ability to attract new customers with Disney+ Day, realize future cruise bookings, and grow and promote their direct-to-consumer services. Moreover, they may be overstating the potential of the Magic Key program and Disney Genie service, opportunities from the Lightyear movie, and the capabilities of their new park reservation system. Finally, management may be concerned about the launch of the Disney Wish cruise ship.
Although management's concerns about Disney+ growth, park disruptions, and movie release timing suggest the potential for near-term headwinds, market expectations are still too pessimistic given the firm's diverse growth drivers post-Fox acquisition. As such, longer-term equity outperformance remains warranted.
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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