Should you buy Disney stock (Feb 2023)

Bullish Studio

For more detailed investing ideas visit: https://www.overlookedalpha.com  Despite an aggressive push into streaming, a recent price hike has cost the company subscribers.   As of last quarter, total number of Disney Plus subscribers had fallen 1% to 161.8 million and the segment posted a 1-billion-dollar loss.   Meanwhile, linear networks, saw a 16% decrease in profits to 1.26 billion.   That decline is not surprising as consumers turn to online streaming services and under returning CEO Bob Iger, Disney plans to “transform its business” by reducing costs, cutting jobs and restructuring its business model.   Right now, the company is valued around 3 times revenue or 21 times EBITDA. That multiple would be acceptable if Disney’s streaming service was showing growth. Even at break even it would add an extra billion dollars to bottom line earnings.    However, the online streaming industry, is fiercely competitive and the high cost of content means it may not be as profitable as once thought.   Overall, Disney is a quality brand and an attractive opportunity at the right price. But the price right now isn’t low enough. That’s why I give the stock a neutral rating.  But these are my personal opinions not financial advice and I do own a small amount of Disney stock. For more detailed investing ideas visit our website overlookedalpha.com

Transcript

00:00 Should you buy Disney stock? Disney stock has gained 24% so far in 2023 taking the market

00:06 cap to $201.6 billion. With $8.5 billion in cash and $45 billion in long term debt the

00:14 enterprise value is around $254 billion. Latest Disney earnings showed better results than

00:20 expected. Total revenue for last quarter was $23.5 billion an increase of 8% and diluted

00:28 earnings per share was $0.99 versus an expected $0.78. Right now Disney drives revenue from

00:35 three main segments. Entertainment, linear networks and parks and experiences. Parks

00:41 and experiences continues to fire on all cylinders posting a 25% increase in net profit. But

00:48 linear networks and streaming continue to face challenges. Despite an aggressive push

00:53 into streaming a recent price hike has cost the company subscribers. As of last quarter

00:59 total number of Disney+ subscribers had fallen 1% to 161.8 million and the segment posted

01:06 a $1 billion loss. Meanwhile linear networks saw a 16% decrease in its profits to $1.26

01:14 billion. That decline is not surprising as consumers plug in to online streaming services.

01:20 So under returning CEO Bob Iger Disney plans to transform its business by reducing costs,

01:26 cutting jobs and restructuring its business. Right now the company is valued around 3 times

01:31 revenue or 21 times EBITDA. That multiple would be acceptable if Disney's streaming

01:36 service was showing growth. Even at break even it would add an extra billion dollars

01:40 to bottom line earnings. However the online streaming industry is fiercely competitive.

01:46 The high cost of content means it may not be as profitable as once thought. Overall

01:51 Disney is a quality brand and an attractive opportunity at the right price. But this price

01:56 isn't it. I don't think there's enough marginal safety here. That's why I give

01:59 the stock a neutral rating. But these are my personal opinions not financial advice

02:03 and I do own a small amount of Disney stock. For more detailed investing ideas visit our

02:08 website overlookedalpha.com

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