We came across a bullish thesis on The Walt Disney Company (DIS) on Johnson Equity Analysis’s Substack by Kyler Johnson. In this article, we will summarize the bulls’ thesis on DIS. The Walt Disney Company share was trading at $92.99 as of Oct 10th. DIS’s trailing and forward P/E were 35.63 and 17.67 respectively according to Yahoo Finance.
Disney is a global leader in media and entertainment, known for its iconic franchises, theme parks, and extensive content library. With a market cap of $167.8 billion and annual revenues of $90.03 billion, Disney operates across three key segments: entertainment, sports, and experiences. Disney’s Entertainment segment, generating $39.64 billion in 2023, includes Disney+, Hulu, TV networks, movie sales, and content licensing. Revenue here is driven by subscriptions, advertising, and content deals. The Sports segment, primarily ESPN and Star, brought in $17.11 billion through a combination of advertising, subscriptions, and licensing. Lastly, the Experiences segment, which includes theme parks and cruises, contributed $32.55 billion, driven by ticket sales, cruise bookings, and in-park purchases.
From an investment perspective, Disney presents significant long-term potential. Despite a stock decline of over 50% since its 2021 peak, the company has grown revenue substantially from $67.4 billion in 2021 to $90 billion in the TTM. Challenges such as streaming losses and poor movie performance are being addressed with moves like price hikes, advertising tiers, and increased focus on quality content creation. Disney+ subscribers have grown to 118.3 million, and its streaming business turned profitable in Q3 2024.
Disney’s parks segment remains strong, with operating income rising from $7.3 billion in 2019 to $9.4 billion TTM. Continued investments of $70 billion through 2034 signal future growth in this area. Although movie profitability has lagged, recent box office successes like Inside Out 2 and Deadpool & Wolverine offer optimism that Disney’s creative engine is returning. Financially, Disney’s free cash flow is expected to rebound, with projected FCF margins of 15% by 2035, resulting in $29.72 billion in FCF. Applying a 22x FCF multiple, the projected share price would be $360.53 by 2035, offering a 14.3% CAGR and significant upside. If Disney executes its strategy—returning to high-quality content, optimizing park investments, and improving margins—it has the potential for strong long-term returns.
The Walt Disney Company is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 92 hedge fund portfolios held DIS at the end of the second quarter which was 92 in the previous quarter. While we acknowledge the risk and potential of DIS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DIS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.
Disclosure: None. This article was originally published at Insider Monkey.