Author Topic: DIS - Disney  (Read 46675 times)

Schwab711

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DIS - Disney
« on: September 30, 2015, 12:02:22 PM »
I couldn't find the DIS thread so please link if there is one and I'll move this comment there.

I would love to see DIS spin-off ESPN since the rest of their businesses are fantastic and I would hate to see them suffer because of ESPN's problems. It doesn't seem like ESPN is necessary for their current business strategy other than ABC/ESPN sports cross-over. They could keep a controlling stake (31% or 51%, depending on their relationship with Hearst) and stipulate an ABC/ESPN relationship agreement for the next 5-10 years. It would help DIS lower their reliance on cable bundling.

The main argument against this is ESPN's carriage negotiating leverage supports higher carriage fees for the Disney Channel and other 2nd-tier channels (ESPN2, ESPN3, ESPNU, ect). I don't think this would be too big of a problem if they kept a controlling stake in ESPN and secured the relationship agreement.

I just want to buy DIS but I don't want ESPN to be so important to my investment.

Stock Price: $101.83
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Fwd P/E:   18.1
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DCG

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Re: DIS - Disney
« Reply #1 on: September 30, 2015, 12:44:15 PM »
At one point (just a few years ago) part of the reason I like Disney was because of ESPN. Now, they've unfortunately basically turned ESPN into TMZ for sports (especially with their website/app).

Schwab711

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Re: DIS - Disney
« Reply #2 on: September 30, 2015, 01:02:33 PM »
At one point (just a few years ago) part of the reason I like Disney was because of ESPN. Now, they've unfortunately basically turned ESPN into TMZ for sports (especially with their website/app).

Agreed! I think my biggest concern with ESPN is what you mention. They have chased away hardcore sports fans who are now going to specialized sites instead (MLBTR, FanGraphs, ProFootballFocus, ProFootballTalk, ect). I think ESPN is going to regret this strategy once cord-cutting/de-bundling begins since the average fan they currently pander to will not pay the >$20/month for ESPN alone (the a la carte equivalent/SlingTV price).

I keep waiting for NBC or Fox sports to go on a niche sports site buying spree and try to become the sports leader for hardcore fans. That is going to be the long-term future of sports content, in my opinion.

Does anyone think sports is in a bubble? Team prices, tv deals, ticket prices, and just about everything else related to them. It seems like more average folks are big sports fans now than even 10-15 years ago. It almost seems like a fad for the average person.

ccap

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Re: DIS - Disney
« Reply #3 on: October 01, 2015, 07:19:54 AM »
I think sports are making some decisions that they will regret later on.  Many local baseball games are no longer on TV.  They are on small cable channels.  This probably makes the team money in the short term, but if kids aren't watching the sports on TV, they will have no interest in forking over money when they are older.  College sports are similar.  Team specific cable channels have sprouted up that keep the games from kids (e.g. Longhorn network).  If kids aren't brainwashed early, they won't fork over cash later.

ccplz

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Re: DIS - Disney
« Reply #4 on: October 01, 2015, 09:59:15 AM »
Disney seems a lot more expensive than Fox/TWX with a comparable set of assets..

GregS

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Re: DIS - Disney
« Reply #5 on: February 10, 2016, 12:45:28 PM »
Anyone looking at Disney at these levels?

Questions over ESPN are obviously weighing on the stock, but the IP is best in class and the studio pipeline is enormous. More Star Wars, more Marvel, sequels from Cars, Nemo, Frozen, Toy Story, Incredibles, Pirates. Studio IP driving theme park/resort visits and merchandising. Increasingly global reach.

Here's Iger stating the bull case on the call (in response to a question about separation):

Quote
I'm not going to talk about separating those assets. We fully expected that our media assets are going to continue to contribute to our growth. We also are designed, as a Company, to leverage intellectual property across a lot of our businesses or to leverage the collection of brands nicely in the marketplace. And that also is reflected in the way we operate the businesses from an expense perspective, with consolidation in many different areas.

So if you look at the profile of the Company, interestingly enough, since 2009, look at the growth profile, the Company has grown on a compounded basis by 14%. The media networks have driven about 8% compounded a year and the rest of the Company grew 23%. So 8% a year is pretty strong. 23% is extraordinary. 14%, pretty damn strong, too.

I think that what that says is really, is that over the period of time, we've actually diversified our ability to generate growth and profitability and that was very purposeful. These investments that we made it Pixar and Marvel and in Lucasfilm and the investments that we've made in our parks were designed for us to diversify our bottom line or our growth. And that was not just across businesses, but really across the world, because a lot of these businesses are global in nature, unlike some of our media assets.

TorontoRaptorsFan

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Re: DIS - Disney
« Reply #6 on: February 10, 2016, 01:16:47 PM »
It's a permanent holding for me.

Wonderful set of movies coming down the pipeline, StarWars expansion to the theme parks. New Disney park opened in China.

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LongTermView

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Re: DIS - Disney
« Reply #7 on: February 10, 2016, 01:26:12 PM »
Long DIS.  They are a unique company.

valueinvesting101

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Re: DIS - Disney
« Reply #8 on: February 10, 2016, 01:31:45 PM »
Disney's success is based on two set of films. Superheroes and Animation. Boundary between then is blurring already.

This has been successful strategy for last few years but it seems that we are reaching saturation level with it. There are other franchisees as well. Harry Potter series is adding 3 more movies. LOTR adding 3 Hobbit movies etc. 

Disney does have good assets but they are bound by competition and it would be difficult from to continue same success over next 5 years due to fatigue with similar kind of movies. This is qualitative assessment.

I believe ultimately Disney's success will depend on capitalizing growing middle class and younger population in Asia. It could be tricky market to do well over medium to longer term.

For quantitative perspective, ESPN forms bulk for profit percentage and that model is definitely under pressure.  Media networks was 69% of operating income in 2011 and 53% in 2015. Partly due to success of studio entertainment which rose from 7% of OP to 13.5% but 3 times in actual numbers from $618 million to $1.9 billion. This is definitely cyclical part and drives park and consumer product revenue to large extent.

So you have 50% of profit at risk from ESPN and remaining looks right now but can falter due to change in market taste or bad execution or something else. From execution perspective, studio side seem to be doing really good during last 4 years. Can it be guaranteed for next 4-5 years? I am skeptical. But it is hard to predict business.

I think it a good business and better quality than Fox or TWC but it valuation seems expensive right now.


DavidVY

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Re: DIS - Disney
« Reply #9 on: March 24, 2016, 10:25:28 AM »
Selling around 10x EV/EBIT (gurufocus).

Its selling around 20 P/E with huge tailwind of shanghai park opening soon, ginormous real estate investments (carried way below cost).

The Disney machine is a money-suck that appeals to all ages, demographics and geographies.

I foresee a huge runway ahead and ever increasing global demand for its products (giant middle class emerging in developing world).

ESPN has great brand value. I don't really see it going anywhere long-term. Minor setbacks w/the content debundling issue imo.
« Last Edit: March 24, 2016, 10:27:47 AM by DavidVY »