1. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 99
The Walt Disney Company (NYSE:DIS) is an entertainment company worldwide that operates through two segments, Disney Media and Entertainment Distribution; and Disney Parks, Experiences and Products. It is one of the best entertainment stocks to invest in. On February 8, during the earnings conference call, CEO Bob Iger confirmed that The Walt Disney Company (NYSE:DIS)’s plans involve laying off 7,000 workers. The announcement followed an earnings beat that resulted in an increase in the company’s stock price after hours. Iger also mentioned the possibility of restoring Disney’s dividend this year.
On April 18, Deutsche Bank analyst Bryan Kraft raised the firm’s price target on The Walt Disney Company (NYSE:DIS) to $135 from $130 and maintained a Buy rating on the shares. Kraft believes that the shares offer an attractive opportunity in the second half of 2023. He expects that The Walt Disney Company (NYSE:DIS)’s fiscal Q3 will be a turning point, with the company transitioning from three quarters of earnings declines to sustained positive earnings growth. The firm also expects Disney’s cost reduction initiatives to have a positive impact, resulting in an improvement in loss in Streaming and smaller year-over-year operating income declines in Linear Networks. Deutsche sees the possibility of a multiple re-rating higher since the shares are trading in-line with the S&P 500 Index at 19-times earnings.
According to Insider Monkey’s fourth quarter database, 99 hedge funds were bullish on The Walt Disney Company (NYSE:DIS), compared to 112 funds in the last quarter. Nelson Peltz’s Trian Partners is the largest stakeholder of the company, with 9 million shares worth $784.5 million.
VGI Partners made the following comment about The Walt Disney Company (NYSE:DIS) in its 2022 annual investor letter:
“The Walt Disney Company (NYSE:DIS) is a diversified media conglomerate operating media networks, theme parks, film and TV studios and direct-to-consumer streaming services. It is the global leader in theme parks with hotels and cruise lines aimed at families. Key assets within Disney are the instantly recognisable entertainment franchises that have multiple avenues of monetisation such as Mickey Mouse, Star Wars, ABC and Marvel’s Avengers.
Disney’s share price declined due to a number of factors in 2022, presenting us the chance to purchase a long-admired business and its unique collection of valuable intellectual property assets at what we consider to be a very attractive valuation. Summarily, the EPS of Disney has declined from US$7 in 2018 to ~US$2.60 in 2022 but we believe that the earnings power of the assets has not diminished to anywhere near this extent.
Disney is currently undergoing a business transition within the Media and Entertainment Distribution division (DMED) from traditional media property distribution via third parties (i.e. cinemas and broadcast networks) to a Direct-To-Consumer (DTC) model via the Disney+ streaming service. A key element of our thesis is that the earnings power of the company is currently being masked by the marketing and content investments within Disney+ and that this will normalise over the next several years. To put this in perspective, Disney+ (DTC sub-segment) currently generates operating losses of over US$3.3bn (a negative 14% operating margin) compared to operating margins at its nearest streaming competitor, Netflix, of +15.5%…” (Click here to read the full text)
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