Is Disney in Deep Trouble?

Disney (DIS) has been an ideal stock for long-term investors for the last few decades. With the company reporting consistent growth, the stock has appreciated massively over the last 10 years. However, many investors seem to believe that Disney has peaked and is in for a rough time due to the concerns surrounding its Media business. Disney has a branched out revenue stream, which is why I think investors shouldn't just focus on the struggles of its Media Business.

Despite the troubles, Disney is displaying growth that opponents just cannot match.
The company’s media segment is faltering as broadcast TV gets disturbed by internet delivered content. However, the company’s customer merchandise and its box office segments were up approximately 30 percent last year, which contributed to a 13 percent surge in overall operating profit. The House of Mouse generated around $15 billion of earnings in the previous year, accounting for a 36 percent surge in the past two years. That is the advantage of having various revenue streams that trace all segment of the entertainment industry from cable TV, to resorts and theme parks, to feature films, and to retailing.

One main reason investors are concerned is underperformance of the company’s media networks segment, as approximately 45 percent of Disney’s overall revenue comes from this segment. However, extensive trends in the cable ecosystem suggest that the cable business model is still performing well. Comcast’s latest results appear to specify that the rash of cord cutting and bleeding that has been taking place in cable video has declined.

As per Comcast’s most recent quarterly results, the company saw a surge of 85,000 cable video subscribers. This accounts for the finest quarterly result in around eight years. Apart from this, the company has forged various successful character franchises that get run via a righteous cycle of consumer products, games, presence in theme parks and then their own introduction on the big screen through studio entertainment.

Winnie the Pooh, Mickey Mouse, Spider-Man, Star Wars, princesses and Cars account for over $1 billion each in Disney's sales volume. As long as the company does not lose its capability of either gradually creating new franchises, or being able to recognise and buy them at a sensible cost, it will endure and have long-term victory. So, betting against Disney isn't wise, as I think it is still an ideal stock for any portfolio.
Published on Apr 21, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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