3. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 99
The Walt Disney Company (NYSE:DIS) on May 10 reported a FQ2 non-GAAP EPS of $0.93, missing Wall Street estimates by $0.01. Revenue over the period increased 13.4% year-over-year to $21.82 billion, in-line with market consensus. The average monthly revenue generated per paid subscriber of Disney+ in the domestic market rose from $5.95 to $7.14, attributed to a surge in average retail pricing. In the first quarter of 2023, Steve Cohen dumped his entire stake in The Walt Disney Company (NYSE:DIS), which was worth $1.3 million.
On May 12, Wolfe Research analyst Peter Supino downgraded The Walt Disney Company (NYSE:DIS) to Peer Perform from Outperform without a price target. The analyst informed investors that Disney’s direct-to-consumer subscriber and linear TV projections have been worsening. Wolfe Research believes that Disney’s plan for a larger subscriber base, higher prices, and lower costs appears to be contradictory. The firm also stated that the subscriber forecasts for Disney+ are now deemed risky, and the company’s linear TV outlook is deteriorating. Furthermore, the $2.5 billion cost reductions are already factored into consensus estimates, the analyst told investors.
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 earlier quarter. Nelson Peltz’s Trian Partners is a significant position holder in 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)
