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The Walt Disney Company
Biweekly Valuation – Valutico | May 20, 2024
A milestone for the DTC segment
For the quarter ending March 2024 (Q2 FY2024), Disney’s Direct to Consumer segment, including Disney+, Hulu, and Disney+ Hotstar, turned profitable for the first time. This achievement was driven by higher subscription revenues, mainly from the growth of Disney+ subscribers and increased subscription prices.
Growth Outlook
Although softer results are expected in Q3 FY2024 due to Disney+ Hotstar, the combined streaming businesses are projected to remain profitable in Q4 FY2024 and drive significant growth, with further profitability improvements anticipated in FY 2025.
CEO’s stance
Disney’s CEO Bob Iger believes that Disney’s streaming segment has more progress to make before becoming a significant profit source. They are tackling profitability challenges by enhancing technology, introducing new bundles, cracking down on password sharing, and cutting marketing costs.
“As we got into the streaming business in a very, very aggressive way, we tried to tell too many stories. Basically we invested too much, way ahead of possible returns. It’s what led to streaming ending up as a $4 billion loss” – Bob Iger, Disney’s CEO.
Competitive Landscape
Disney’s streaming business faces stiff competition from Netflix. Disney applauds Netflix’s approach to building strong technology to support its platform including its recent password sharing crackdown strategies.
“In many respects, Netflix is the gold standard when it comes to streaming. What we’re building is the technology that Netflix has had in place and has been building for well over a decade to improve the business from a bottom-line perspective. That starts with password sharing.” – Bob Iger, Disney’s CEO
Beyond the DTC business
Disney’s TV business continues to struggle as millions of Americans abandon cable TV annually. Conversely, the theme parks and experiences segment has significantly bolstered Disney’s performance. However, with consumer sentiment peaking post-COVID, the future outlook for this segment remains flat.
Opinión de Valutico
As per Valutico’s analysis, Disney is slightly overvalued. DCF valuation is at USD 159 billion, with Trading Comparables suggesting a range of USD 100-200 billion. Moreover, Disney’s stock has fallen over 10% after the release of Q2 2024 results were announced mainly due to softer guidance for Q3 2024.
Road Ahead
While Disney grapples with slower growth in its linear TV business and challenges in CEO succession planning, it will be interesting to see how the current initiatives aimed at enhancing the streaming business will deliver positive results.
Descargo de responsabilidad
Este artículo tiene únicamente fines informativos y no constituye asesoramiento en materia de inversión. No debe tomarse como una solicitud, oferta o recomendación para vender o comprar ningún instrumento financiero.
