The Walt Disney Company

DIS Details

The Walt Disney Company (NYSE: DIS) is a multinational entertainment conglomerate. It is divided into two segments: 1) Disney Media and Entertainment Distribution (DMED), which produces and distributes international film and episodic television content, and 2) Disney Parks, Experiences, and Products (DPEP), which operates theme parks and resorts, cruise lines, vacation clubs, and other businesses, as well as licensing and selling branded merchandise through retail, online, and wholesale channels.

Latest News:

• Unsolicited Offer by Tutanota: On February 07, 2022, Tutanota LLC has made an unsolicited mini-tender offer to purchase up to 240,000 shares of Disney common stock at USD 143 per share in cash. Because the offer is conditional on the closing price per share of Disney's common stock exceeding USD 143 per share on the last trading day before the offer expires, Disney advises shareholders not to tender their shares in response to Tutanota's unsolicited offer. This means that Disney shareholders who tender their shares in the offer will receive a below-market price unless Tutanota waives this condition.

Q1FY22 Results:

• Double-Digit Growth in Topline: The company witnessed a YoY growth of 34.28% in total revenue to USD 21.82 billion during Q1FY22 (ended January 01, 2022) from USD 16.25 billion during Q1FY21 (ended January 02, 2021). The DMED segment, accounting for 66.85% of the total revenue in Q1FY22, improved 15.20% YoY, whereas the DPEP segment grew 101.62% YoY.
• Surge in Profitability: DIS reported a net income of USD 1.10 billion in Q1FY22 vs. USD 17 million in Q1FY21.
• Cash and Debt Position: As of January 01, 2022, the company had cash & cash equivalents of USD 14.44 billion and total debt of USD 54.13 billion.

 Key Risk:

• Stiff Competition: DIS is directly competed with by alternative providers of similar products and services and other forms of entertainment. If the competition heats up, even more, the company's prospects may be jeopardised.
• Continued Impact of COVID-19 Pandemic: The COVID-19 pandemic hit the entertainment industry hard, where DIS operates. Lockdowns and travel restrictions imposed to prevent the virus's spread resulted in a significant reduction in global commercial activity. If the downward trend continues, the company's financials may suffer.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

 Stock Recommendation:

DIS' stock price has fallen 22.64% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 128.38 to USD 191.67. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 167.93.

Considering the correction in the stock price, strong top and bottom-line performance, efforts in expanding the DTC business, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 137.00, down 0.12% as of April 01, 2022.

Three-Year Technical Price Chart (April 01, 2022). Source: REFINITIV, Analysis by Kalkine Group

 Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.