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Disney Stock: 3 Reasons It’s Making a Comeback

Posted On November 21, 2017 2:13 pm
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Investors finally cheered earlier this month after Disney stock gained amid the news of the company’s interest in buying 21st Century Fox (NASDAQ:FOX). Analysts think that acquisitions are the only way forward for Disney in the competitive environment. The company has a track record of turning its buyouts into highly successful businesses. Buying Fox will make Disney a media behemoth, giving the company ownership of big entertainment names like X-Men, Avatar, FX and National Geographic.

Taken from: https://seekingalpha.com/article/4125473-things-looking-disney

Disney stock is finally in the limelight and looks a strong buy. Earlier this year, the company took massive hits as viewers in the US continue to unsubscribe from ESPN. Disney’s fourth quarter results were weak, to say the least. Three out of four business units posted declines in revenue and operating income. Operating income of Media Networks, Studio, Consumer Products and operating income declined 12% in the quarter.

However, it’s very important to keep in mind that most of the revenue decline is because of the weakness in Studio entertainment division. If we take out the numbers from this division, the overall company’s revenue is increasing year over year. In the fourth quarter, Studio Entertainment business revenue declined by 21%. Studio Entertainment is volatile. However, things are looking good for the segment in 2018. The business will get a major boost from the massive success of Thor: Ragnarok. Some other catalysts include upcoming movie of Star Wars, Black Panther, The Avengers: Infinity War and Ant-Man.

The Rise of ESPN

It is also important to note that Disney has not given up on ESPN. On Nov. 9, Disney announced that it plans to launch EPSN streaming service, known as ESPN+. The company is already offering ESPN streaming service for HULU customers. ESPN is also launching “Sports Center” videos on Snapchat. These videos will be short clips summarizing different sporting events. Analysts think Disney can invest in its own content streaming service to compete with Netflix. Disney has a massive pile of cash when compared to Netflix, but Netflix’s content dwarfs Disney in almost every category. Disney’s net income is about $9 billion while Netflix’s net income is $440 million.

Parks Business and Growth in China

Disney’s Parks business remains robust. In the fourth quarter, Parks and Resorts business revenue increased by 6% and operating income by 7%. The biggest takeaway from this section is that most of this revenue growth was because of Disney’s Shanghai Park, which was launched just a year ago. The company is investing heavily in China to increase its footprint. Analysts think that China will be a major growth market for Disney in the coming years.

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