Reduced prices for this entertainment stock have prompted the company itself to go on a buying spree. In the past month, it spent about $2.4 billion to buy back shares, bringing the total buybacks for 2015 to some $5.6 billion. Credit Agricole just initiated coverage of the stock with an “Outperform” rating.
The Walt Disney Company (DIS 103)
There has been a lot of talk lately about how people are cutting the cable ‘cord’ and that will be bad for companies like The Walt Disney Company (DIS). I very much disagree. First of all, just buying a select group of channels is not going to be all that much cheaper if you take it case by case, and the point to be made is this—if consumers have more choices, then that will help the best and hurt the worst. How we watch content may be changing, what we watch? Not so much. And this gives us a chance to buy these companies at bargain prices.
Even though studio/movies are only 15% of the revenues, the Disney brand drives other sectors, like the theme parks, and of course the consumer/products attached to these movies.
ESPN is one of the most profitable “brands” in the content business, and talk of any fall-off here in revenues is something I very much disagree with. In fact, as viewers have more choice, there are certain brands they are willing to pay more for and the sports/venue angle is a huge one, with all sorts of global possibilities. For ESPN, they are near limitless, and it will continue to be the cash-making-cow it has been. Globally, the sports business is still in a solid growth mode for ESPN, with the global game now being soccer. As sports changes, ESPN rolls right with it. No matter what ‘package’ is bought, it’s likely that most will include ESPN in the mix.
The problem for me, in the past, is that DIS was a wonderful company, but too expensive to be a buy. But, now it’s reasonably priced in my opinion. At 13.5 times 2016 projected cash flow, I believe DIS makes for a good fundamental buy.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, September 4, 2015