Hi friends !
From its humble beginnings as a cartoon studio in the 1920s to its preeminent name in the entertainment industry today, The Walt Disney Company is a household name that has shaped generations of families in the United States and around the world through its stories.
Today, The Walt Disney Company and its subsidiaries are a leading diversified international media and family entertainment company. It includes Disney Parks, Experiences and Products, Disney Media & Entertainment Distribution and four groups - Studios, General Entertainment, Sports and International - that focus on content development and production.
The Walt Disney Company's mission is to entertain, inform and inspire people around the world through the power of strong storytelling, reflecting its iconic brands, creative minds and innovative technologies.
What is the strategy of The Walt Disney Company?
The Walt Disney Company has a generic strategy of competitive advantage based on the uniqueness of its entertainment, media and theme park offerings.
In 2018, it began a strategic reorganisation along these lines: the new structure consolidates the company's direct-to-consumer services, technology and international media operations into one global business to capitalise on growth opportunities. In addition, the parks and resorts and consumer product sales have been combined to create a new single location that blends history and Disney characters.
"We are strategically positioning our business for the future, creating a more effective global framework to serve consumers around the world, increase growth and maximize shareholder value," said Robert A. Iger, chairman and chief executive officer of The Walt Disney Company on the reorganization.
Under the new structure, the new Direct-to-Consumer and International segment will include Disney's international media businesses and the company's global direct-to-consumer businesses, including the Disney+ streaming service, the company's stake in Hulu and its ESPN+ streaming service.
The new Parks, Experiences and Consumer Products segment will become the centre in which Disney's stories, characters and franchises come to life. Disney's global consumer products business is merged with Walt Disney Parks and Resorts.
Overview of The Walt Disney Company's activities
The Walt Disney Company focuses its activities on the media and entertainment sector, and its turnover is divided between the various activities as follows
Operation of television and radio stations (39.7% of CA)
The Walt Disney Company primarily owns ABC Television Network (8 channels owned in the US as of the end of September 2020), ESPN Radio Network, Disney Channel, Freeform, FX and National Geographic. The group also produces and distributes television programmes, produces video games and operates websites.
Film production and distribution and video streaming (23.7% CA)
Film production and distribution and video streaming account for 23.7% of turnover, with its flagship product Disney+. Disney+ is a subscription video streaming service with programmes from the Disney, Pixar, Marvel, Star Wars and National Geographic brands. Programming included approximately 33,000 episodes and 1,850 films from the company's library of produced and acquired television and films, as well as approximately 75 exclusive original series and films in 2020. Disney+ launched in November 2019 in the US and four other countries and launched in other Western European countries in spring 2020.
Animation studio operations and artistic production (13.5% CA)
The Studios produce films under the Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, Pixar and Searchlight Pictures brands. In fiscal year 2022, the Studios plans to produce approximately 50 titles, which include films and episodic television programs, for distribution in theaters or on DTC platforms.
Leisure facility operations (23.1% CA)
Disney operates various resorts around the world: seven in the United States (Walt Disney World Resort, Disneyland Resort and Aulani, etc.), two in France (Disneyland Resort Paris), one in Japan (Tokyo Disneyland Resort), one in Hong Kong (Hong Kong Disneyland) and one also in China (Shanghai Disneyland). The group is also involved in the sale of cruises (Disney Cruise Line), the organisation of trips (Disney Vacation Club and Adventures By Disney), the design and development of parks and other real estate and the sale of consumer products (children's books, toys, game software, films, etc.).
Breakdown of turnover worldwide
Net sales are distributed geographically as follows United States and Canada (79.5%), Europe (11.2%) and Asia/Pacific (9.3%).
Fundamental Analysis of The Walt Disney Company
Disney's first half 2022 results
The Walt Disney Company reported a mixed second quarter 2022, which while it far exceeded analysts' revenue expectations, missed earnings estimates. The entertainment giant increased total revenue 23.3% year-over-year to $19.2 billion and adjusted earnings per share (EPS) jumped 36.7% to $1.08.
The company's Disney Media and Entertainment Distribution segment, which accounts for 71% of its second quarter revenue, grew 9.5% to $13.6 billion. The Disney Parks, Experiences and Product category climbed 110% to $6.7 billion, driven by a reduction in COVID-related concerns from the prior year.
The company's operating margin increased 343 basis points to 19.2%, resulting in operating income of $3.7 billion. Net income was $1.57 billion, up 72% from the year-ago period.
At a time when one of its main competitors, Netflix, is facing growing pains, The Walt Disney Company has continued to make progress on the streaming front. With now more than 205 million subscribers split between Disney+, ESPN+ and Hulu, the company is poised to become the new king of streaming. In the second quarter, Disney+ subscribers grew 32.9% to 137.7 million and CEO Bob Chapek said the company is still on track to reach 230-260 million subscribers by fiscal 2024.
Currently, in the context of the global market downturn we are experiencing, Disney shares are trading at 20 times expected earnings in 2023. The entertainment company's valuation also looks very reasonable if the earnings per share estimates are met.
Technical analysis of the Disney share
Over the last 12 months, the Disney share has followed a downward trend identified by the oblique channel (in black on the chart), whose lower limit has been tested several times in recent months. The Disney share price is down 45%.
The medium-term trend of the Disney share is clearly bearish with a 20-day moving average (green on the chart) below the 50-day moving average (black on the chart), itself below the 100-day moving average (red on the chart).
In the short term, Disney's share price is trending downwards with the MACD in negative territory at its signal line. The Stochastic RSI is in neutral territory, so the stock is neither overbought nor oversold.
See also our article Chart and technical analysis: how to use it in the stock market
Our opinion on Disney shares
As a long-term investor, the short-term headwinds of inflation, interest rates and a possible recession have caused a large sell-off in Disney stock and appears to provide investors with an attractive entry point. Overall, Disney's second quarter performance was good, with its theme parks recovering and its streaming services continuing to grow at a rapid pace. Between its declining valuation, strong financial performance and unparalleled global brand recognition, it is safe to assume that The Walt Disney Company will be a good stock to own in the future.
Enjoy ^^