3. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Investors: 92
Jim Cramer has some reservations about The Walt Disney Company (NYSE:DIS), focusing on the company’s content and its stock value. He emphasizes that the issue is not with Disney’s content quality or its stock price but with how the market perceives them. Cramer points out that The Walt Disney Company (NYSE:DIS)’s content largely targets female audiences with movies featuring female protagonists, leaving a gap for young boys. Over the past decade, only a few films, like “Luca,” “Coco,” and “Onward”—the latter of which wasn’t very successful—address this demographic.
“Okay, so my problem is with Disney, and this is important—it’s the company and the content, not the stock. Someone at Disney right now is probably saying, “This guy doesn’t fully recognize the value of our content,” so please let me explain.
There have been only two and a half movies in the last ten years that fit a very significant but widely underserved demographic—young boys. My boys watch Moana, Inside Out, Encanto, Raya and the Last Dragon, Fancy Nancy, Frozen, Frozen 2, Encanto again—you know, all of this is great content, but, and it’s a big but—all of this content has female protagonists and coming-of-age stories, which are not highly relatable for young boys. There’s been two and a half—Luca, Coco, and Onward. Onward wasn’t even a big hit.
Again, I’m not going to disagree or agree on content. What I would tell you is that I think the Street does not recognize the value of the whole library. They don’t recognize the value that ESPN actually has. They don’t recognize that the theme parks are just magnificent gems. They’re focused on the labor problems, they’re focused on some of the issues you just mentioned, and they’re focused on what I think are important zeitgeist issues but are missing the point of the premium property that is Disney.
That’s why, as you know, we own it for the Trust, and why Jeff Marks and I are discussing buying more here because it is so low. That said, Disney has to find the right CEO, and once they do and the vision is really cleared up, people are going to say, “Why didn’t I buy Disney in the 80s? What was I thinking?”
The Walt Disney Company (NYSE:DIS) is a strong investment choice, supported by its diverse content library, impressive streaming growth, and recovery in its theme parks. The Walt Disney Company (NYSE:DIS)’s extensive collection, including beloved franchises like Marvel, Star Wars, Pixar, and Disney Animation, enhances its competitive edge in both streaming and traditional media. The Walt Disney Company (NYSE:DIS)’s streaming platforms—Disney+, Hulu, and ESPN+—have shown remarkable growth, with Disney+ alone surpassing 230 million global subscribers, reflecting the increasing shift towards digital content.
Moreover, The Walt Disney Company (NYSE:DIS)’s theme parks are recovering well from the pandemic, with higher attendance and guest spending driving revenue up. Ongoing investments in new attractions and park infrastructure are set to fuel further growth. The Walt Disney Company (NYSE:DIS)’s strong financial performance is evident in its Q3 2024 revenue of $24.5 billion, marking a 7% increase from the previous year and demonstrating solid profitability and cash flow. Under CEO Bob Chapek’s leadership, The Walt Disney Company (NYSE:DIS)’s focus on innovation and global expansion positions it for continued success and long-term growth.
Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
