4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 112
The Walt Disney Company (NYSE:DIS) is an American entertainment conglomerate. It is one of the best stocks for beginners. On November 22, Tigress Financial analyst Ivan Feinseth assigned a Buy rating to The Walt Disney Company (NYSE:DIS) shares but lowered the price target to $177 from $229, citing a re-rating of value due to short-term linear network pressure. Nonetheless, the analyst thinks the return of former CEO Bob Iger will result in higher creativity, and the ongoing release of blockbuster content will continue to support growth. The Walt Disney Company (NYSE:DIS)’s fortress balance sheet, strong cash flow, and prudent capital allocation allow it to invest in content development, new theme park attractions, and growth initiatives, the analyst added. The Walt Disney Company (NYSE:DIS) is on his Research Focus List and Focus Opportunity Portfolio.
According to Insider Monkey’s data, 112 hedge funds were bullish on The Walt Disney Company (NYSE:DIS) at the end of Q3 2022, compared to 109 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is one of the leading stakeholders of the company, with 3.50 million shares worth about $331 million.
Here is what Third Point specifically said about The Walt Disney Company (NYSE:DIS) in its Q3 2022 investor letter:
“As disclosed in our Q2 letter, we reinitiated a significant position in The Walt Disney Company (NYSE:DIS) when the company retested its Covid lows earlier this year. At the current price, Disney is trading for little more than the stand-alone value of its Parks business and a mere 15x ’24 “street” consensus. The company remains early in its Direct to Consumer (“DTC”) transition with a leading market position, and yet the current stock price ascribes negligible value to the streaming business. We believe this is due to questions around the terminal economics of streaming, given large losses being generated today at Disney (>$1 billion dollars last quarter) and stagnating margins at peers such as Netflix. On the last earnings call, management highlighted three items that could lead to an inflection in DTC profitability over the next 12 months: a 38% price increase for Disney+ in the US; moderating growth in cash content expense; and an advertising tier for Disney+ launching in two months that can drive additional ARPU given high demand for the Disney brand amongst advertisers.
While the company has guided Disney+ achieving breakeven sometime within the fiscal year ending September 2024, the valuation suggests the market remains skeptical. Disney only trades at ~14x the $7 in earnings generated prior to the Fox acquisition, which implies investors don’t expect earnings to meaningfully exceed this figure in the coming years. Hence, the first value driver we highlighted in our last letter is the opportunity for management to optimize Disney’s cost base to drive earnings growth. We believe Disney has ample means to rationalize costs across its operating platform and deliver targeted content for home viewing that does not entail the same cost structure of exclusive theatrical releases…” (Click here to view the full text)
