The Walt Disney Company (Nyse: DIS)

Ticker: DIS
Buy market: $101
Take Profit: $125

The Walt Disney Company (Nyse: DIS) is the largest entertainment company, consisting of several segments.

The Media Networks segment (35.7% of total revenue) includes video content production and internal broadcasting over cable networks under the Disney, ESPN, Freeform, FX, National Geographic, ABC brands.

The Studio Entertainment segment (16% of revenue) produces and distributes movies under the brands Walt Disney Pictures, Fox Twentieth Century, Marvel, Lucasfilm, Pixar, Fox Searchlight Pictures and Blue-Sky Studios; organizes, conducts and licenses live entertainment events; produces and distributes music.

The Parks, Experiences & Consumer Products segment (37.7% of revenue) combines a global consumer goods business with a network of parks and resorts around the world.

The Direct-to-Consumer (DTC) & International segment (13.4% of revenue) manages Disney +, ESPN +, Hotstar, and Hulu, the international television networks, channels and streaming services.

Key catalysts

The company's revenue has been growing steadily over the past 3 years. In fiscal 2019, it amounted to $69.57 billion, which is $10 billion more than the revenue in 2018 and $14 billion more than the revenue in 2017.

50 million Disney + subscribers as of April 2020.

In November 2019, Disney launched a global streaming channel deployment. The first countries to be launched were the USA, Australia, New Zealand, and the Netherlands. March 24, 2020 was launched in Ireland, France, Germany, Italy, Spain, Austria, Switzerland.

Disney + offers about 500 films and 7,500 television episodes from brands such as Disney, Pixar, Marvel, Star Wars and National Geographic, as well as original Disney + works.

The service costs $6.99 per month or $69.99 per year, which will bring the company $3.5 billion in revenue from the calculation of the annual subscription, while the number of subscribers is growing.

Along with this, total operating expenses and expenses for the production of original content are expected to reach $2 billion.

In 2018, Disney already launched ESPN +, which offers live streaming of sporting events around the world. As of February 2020, the service totaled 7.6 million subscribers with a payment of $4.99 per month.

In 2020, the beginning of 2021, the release of the blockbusters Mulan, Black Widow, and Eternal from Marvel is expected.

Risks

Disney + will face severe competition in the streaming market from Netflix (Nasdaq: NFLX) and Amazon Prime (Nasdaq: AMZN). Netflix (Nasdaq: NFLX) takes advantage of the pioneer in the streaming market, it is distinguished by a solid original software portfolio.

Disney expects operating profit in the second quarter of fiscal year 2020 to be negative due to the closure of amusement parks.

Cancellation of sporting events is detrimental to the ESPN business.
Streaming Subscription Market

According to Ampere Analysis, Netflix (Nasdaq: NFLX) US subscriber growth is slowing, while Disney + has gained a good market share in two quarters.


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Technical analysis

After falling to $80, the stock price recovered 29%. Disney's stock price is above strong levels in the region of 95-100, but so far it has not managed to go above the middle of a long-term channel built since 2009. The chart shows that the paper corrected by more than 50% and is trading at 61.8 from the last global movement. AO moved into the positive zone, but buyers are not enough to demonstrate strong growth. A good signal is price fixing above the central Pivot Point.

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Summary

We believe that in the medium term, Disney shares (Nyse: DIS) will be able to show 25% growth due to the company's large margin of safety. After quarantine ends, the parks will begin to open, sporting events will attract visitors, and the development of streaming services can become the main driver of the company's revenue growth. 


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