4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 109
Share Price as of November 4: $98.90
The Walt Disney Company (NYSE:DIS) is a movies and entertainment company. It operates through the Disney Media and Entertainment Distribution, and Disney Parks, Experiences and Products segments.
KeyBanc’s Brandon Nispel holds an Overweight rating on shares of The Walt Disney Company (NYSE:DIS) as of October 26. The analyst also placed a $143 price target on the stock.
The Walt Disney Company (NYSE:DIS) had a potential upside of 34% from a discounted cash flow analysis. The company also has a 70% win rate over fourth-quarter earnings. With the company’s strong fundamentals and significant upside potential, now is the best time to buy it on sale.
There were 109 hedge funds long The Walt Disney Company (NYSE:DIS) in the second quarter, and 113 hedge funds long the stock in the previous quarter. Their total stake values were $3.2 billion and $5.2 billion, respectively.
Third Point, a New York-based investment advisor, mentioned The Walt Disney Company (NYSE:DIS) in its third-quarter 2022 investor letter. Here’s what the firm said:
“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 to 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)
