DIS Stock Analysis – Is Walt Disney Stock A Buy?

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Hello once again guys welcome back to Stock radar I'm so happy to have you Guys here and in this video we're going To be talking about Walt Disney's stock NOW Walt Disney stock trades under the Symbol dis they are an older company They are 94 years old this is considered To be a starter stock or a beginner Stock and it's a stock that oftentimes Parents or grandparents will buy for Their children because what kid doesn't Love Disney and so it's a stock people Often buy for their kids or for the Young ones and their family they have a Price to earnings ratio of 18. they have A market capitalization of 157 billion And as far as that dividend goes they Pay a dividend of 1.61 percent they have Been paying dividends for 61 years and They have a nine-year dividend growth Streak now Disney actually has a bit of A confusing dividend history and let's Go ahead and cover that first so Disney Actually paid quarterly dividends up Until 1999 and then they made the Decision to start paying annual Dividends up until 2015. so most Companies out there are going to pay Quarterly dividend evidence to Shareholders and that's what Disney was Doing up until 1999 but then they made The decision to switch over and pay an Annual dividend just because I believe They said it was for accounting reasons

They were tired of sending out so many Small Checks because they're really not A very high dividend stock and so up Until 2015 from 1999 to 2015 they were Paying annual dividends and then in 2015 They said okay let's pay semi-annual Dividends so now they pay dividends Twice a year now as far as the dividend Growth goes between 2007 and 2009 there Was no growth of that dividend paid to Shareholders so they've only been Growing dividends since 2009. that gives Them a nine-year dividend growth streak But this is the first company I've ever Come across that does not pay quarterly Dividends and this was kind of an Interesting learning experience for me Because I was looking at the dividend Yield and it was all over the place or The actual dividends paid per share and I was like what's going on here it took Me like an hour to actually figure that Out because I was so confused by it Because I'm so used to looking at Companies paying quarterly dividends but But Disney has a very strange dividend History and now they pay semi-annual Dividends so first of all let's cover The background on Disney they are one of The leading entertainment companies out There and they have all kinds of family Entertainment experiences and media now They break down their business into five Different segments and they report it in

Just four different segments and I'm Going to explain to you guys what those Are now first of all we have media Networks second we have parks and Resorts third we have Studio Entertainment and then we have consumer Products in interactive media and those Are lumped together when they are Reporting revenue and earnings on their Actual financial documents now their Media networks include ESPN ABC the Disney Channel and freeform are the main Ones that people are familiar with parks And Resorts include Disney World Disneyland and then the Disney Cruise Line and keep in mind they have Disney Parks all over the world not just in the United States I know as a kid one of my Favorite places to go was to go to Disney World in Florida actually I don't Know if it's Disneyland or Disney World But whatever one it is I used to love Going to that Park as a kid and that was Right in Florida so they're well known For that right there and then as far as Their studio and entertainment side of The business goes they have Pixar they Have lucasfilm Marvel and Walt Disney And Disney has operations and parks in Over 40 countries and territories all Over the world this is a massive company That has Global exposure so now let's go Ahead and move on and talk about the Pros and cons of Disney stock and as

Always we're going to start with the Pros so the main Pro for Disney right Now is this proposed acquisition of 21st Century Fox and this is going to give Them access to a lot of new franchises Now keep in mind this deal has not been Approved yet by regulation and it's in The same kind of situation as at T is in Where at T is trying to merge with Time Warner and it's stuck in regulatory Approval now this deal with 21st Century Fox is expected to close in late 2018 to Early 2019 but keep in mind it has not Been approved by Regulators just yet so We can't bet on this being a sure thing But if this deal is approved then Disney Will have a lot more franchises under Them and they will own all of the fox Franchises and the main ones are Avatar Family Guy X-Men The Simpsons alien and Predator and there are about 30 or 40 Different ones I believe but those are The main ones that people are familiar With and this will give Disney more Franchises where they can make branded Products for these movies or just create New versions of these movies like they Are doing with Star Wars now the other Pro for Disney stock is that they Currently have a 30 stake in Hulu and 21st Century Fox has another 30 stake so If this deal goes through then Disney Will officially own 60 percent of Hulu But other people might look at that and

Say that as a con because Hulu is up Against some very big players in the Streaming industry particularly looking At Netflix and Amazon Prime but we're Going to talk about that a little bit Later when we talk about the cons of Disney stock and then the other pro has To be that Star Wars has been very Successful for them as they acquired Lucasfilms studio so the Last Jedi was The most recent Star Wars movie that Came out it was the second most Successful Star Wars movie of all time In terms of box office sales and the Number one most successful Star Wars Movie was the force awakens again both Of these were produced by Disney so Disney has had the two most successful Star Wars movies under them in terms of Box office sales so that acquisition of Lucasfilm has been a very good deal for Disney now another Pro for Disney is the Fact that they do own ESPN network and a Pro for them is the fact that ESPN has Announced they are releasing ESPN plus That should be coming out as soon as Spring of 2018 they were saying March or April and that is going to be a sports Streaming service similar to Netflix and Hulu where people are paying a set Amount per month to have the streaming Service for sports because ESPN is Having big problems right now due to That cord cutting Trend but we're going

To talk more about that when we move on To the cons of investing in Disney stock Another Pro for Disney is the fact that The parks and Resorts have been doing Very well and that has been the Big Money Maker for Disney over the last Year as they saw a 13 increase in Revenue year over year as as of quarter One of 2018 and then the other thing I Like about Disney as we said they are Involved in 40 different countries and Territories all over the world this Gives Disney Global Market exposure and It's good to have Global exposure Through a U.S investment so that is one Thing I like about Disney as well is Through this individual stock investment You're getting exposure to Global Markets and then the final Pro I have For them is that Disney has so many Successful franchises under them and They will be able to continue to make Money with these and also by acquiring Other companies they can add to that Growing list of franchises but now we Are going to move on to the cons of Disney stock and we have to start off by Explaining that this 21st Century Fox Acquisition is in no way a done deal it Is still awaiting regulatory approval And if this does not go through I would Expect to see a significant dip in Disney stock as a lot of the future Growth for Disney is riding on this deal

Going through another problem with this Is that if this deal gets blocked by Regulation Disney would have to pay Fox A 2.5 billion dollar breakup fee So Not Only would this be be disappointing for Shareholders they would also be hit with A nasty fee of 2.5 billion dollars so There is a high amount of risk Associated with the fact that this deal Is still hung up in regulation the other Con for Disney stock is despite the fact That they do have a 30 stake in Hulu and In the future they may have a 60 stake Hulu is in no way the winner of the Streaming game right now so like we said Hulu has some big competitors they have Netflix they have Amazon video there are All kinds of different streaming Services out there we talked about with A t how DirecTV has a streaming service Now Hulu is not winning the streaming Game right now and let's look at the Market share versus Netflix and Hulu so In 2017 Netflix had the largest market Share at 50 percent while Hulu had just 14 percent so Hulu has significantly Less market share of the streaming Industry than Netflix does and they are Also lower than what Amazon Prime has as Far as video streaming subscribers Another con for Disney stock is because Of the fact that they own ESPN again ESPN is hurting right now due to the Cord cutting Trend as ESPN is part of a

Cable package so these cable companies Pay for the rights to air ESPN but when The cable companies are losing massive Amounts of subscribers the future is not Looking very optimistic for ESPN in Terms of the traditional cable viewing Mechanism of sitting down and watching It through your cable subscription However like we said they are going to Be entering the streaming area with ESPN Plus but it's going to be hard for them To actually get market share with that In my opinion because there are just so Many streaming services out there the Other con as far as ESPN goes comes down To the sports airing rights those are Likely going to get more expensive when The contracts go up and I would not be Surprised if we see companies like Amazon or Netflix or apple bidding for Streaming rights of sports programs it's Something you bid on and you have Contracts for a certain amount of time And then those contracts go up and they Go out to bid so the actual airing Rights are only going to get more Expensive and this is not good when you Consider the fact that cable Subscriptions are going down due to the Cord cutting Trend so it's going to get More expensive to air these Sports and There's going to be less customers that Are going to be paying ESPN through the Traditional cable providers the other

Con I have for Disney stock is it's this War between New Media companies and old Media companies we have New Media Companies like Amazon and Netflix coming In and fighting against these old media Companies like Time Warner or we're Talking about Disney and even 21st Century Fox is an old media company and So they're going to have to fight Against these very new and Innovative Companies and a company like Disney due To the size they are they are going to Be slower moving as far as getting into The future and moving forward with Trends and if I were to take a bet as to Whether or not Netflix is going to be More successful in the future versus Walt Disney I would have to put my bet On Netflix another con for Disney stock Is that a lot of their revenue comes From their movies they produce they make Different movies like we said the Star Wars movies and we are seeing declining Us box office ticket sales in in fact U.S movie ticket sales declined six Percent in 2017 because less people are Going out to the movies again that is Not something that is looking very Positive or optimistic for a company That relies heavily on actual movies for Their revenue when they produce box Office hits and make that revenue from People actually going out to the movies When you're seeing a six percent decline

In sales that is not looking very Optimistic another con as we mentioned Earlier is that this acquisition of 21st Century Fox is going to give them old Media assets of course they will have Access to new franchises that were under Fox but what are they actually going to Do with these and how are they going to Innovate and keep up with the New Media Companies because these franchises are Either TV shows or movies and as we said Less people are going to the movies and People are cutting their cable TV Subscription so what they are buying is Old media assets and what are they going To be doing with them to innovate and Eventually have some growth here another Con for Disney stock is that despite the Growth in parks and Resorts every other Segment had flat or declining Year-over-year growth so that was the Only winner for Disney was the parks and Resorts everything else was flat or Declining and we're going to talk about That a little bit more and go into more Detail on the revenue when we look at The fundamental analysis of Disney later On in this video and then the other con I have for Disney stock is that this is A cyclical industry and what I mean by That is it is very sensitive to the Underlying economy like we said the Business segment that was most Successful for them in 2017 was parks

And Resorts and let me ask you guys a Question if all of a sudden people don't Have the money to be going out and Buying groceries or they're getting Behind on their bills do you think they Might be canceling that vacation to Disney World or if we fall into another Bear Market which is going to happen Looking at historical data what do you Think is going to happen to box office Sales and sales of their merchandise in Sales of their movies all this is going To decline so Disney is definitely a Cyclical industry due to the parks and Resorts and the fact that this is a Discretionary EXP fence item people Don't have to go to the movies they're Going to stay home they're not going to Be watching new movies to watch the old Movies they have on DVD or Blu-ray and That makes Disney a cyclical industry so What happens with cyclical Industries They typically outperform in a bull Market and then underperform in a bear Market but we haven't seen that at all With Disney over the last three years Because Disney stock has been absolutely Flat but moving on now let's go ahead And talk about the barriers to entry or The moat for Walt Disney and what Protects me from edging into that Business number one has to be the brand Walt Disney has a very strong brand and They have all these different franchises

Out there that people absolutely love so They have very very strong brand Presence through both the company brand And the franchises so number one is Walt Disney's brand itself and number two is The franchises that are very successful And continue to make them money whether It's through Blu-ray or DVD sales or Making new versions of those movies or Selling branded merchandise the third Barrier to entry I see for Disney is That there is a very High capital Investment in parks and Resorts and Disney has parks and Resorts all over The world so if you're trying to compete With Disney on their Disney World and Disneyland and their Disney Cruise Line You would need Millions if not billions Of dollars to build these Parks all over The world so the high upfront cost Provides a high barrier to entry for the Parks and Resorts segment of their Business and then the fourth one ties in Again with the franchises is that these Franchises have very loyal fans and if We use Star Wars for example there are So many people that just absolutely Adore that franchise they have very Loyal fans and these Star Wars fans will Probably go out and watch every Star Wars movie until the day they die just Because they love that franchise so much So there's a lot of customer loyalty to Disney through watching these movies and

Then buying the Branded products but Anyways guys that wraps up the beginning Of this video talking about Walt Disney Stock now we are going to jump over and Look at the fundamentals okay so now we Are going to look at some of the Fundamentals for Disney stock and as Always we are going to start by looking At the assets so what we we can see here Is that total assets have grown every Single year at an average rate of 4.4 Percent per year since 2014 and total Assets grew 6.5 percent from quarter to Of 2017 to quarter one of 2018. now on The other hand cash and cash equivalents Declined from 2016 to 2017 however cash And cash equivalents grew 23 percent From quarter to of 2017 to quarter one Of 2018. so what we can see here is that Cash and cash equivalents are at an All-time high since 2014 so basically Looking at the asset growth we see that Disney is showing slow but consistent Growth of assets and the cash pile is Growing like I have said before if I'm Looking at a potential growth investment What I want to see is consistent Double-digit growth of total assets over In many years and so looking at Disney We can see they are definitely not a High growth investment but they do show Some signs of slow growth and Consistency now moving on to liabilities This is where things are not looking as

Good for Disney we can see that total Liabilities have grown every single year At an average rate of 11.6 per year Since 2014 and total liabilities are Growing significantly faster than assets On top of that total liabilities grew 13.4 percent from quarter to of 2017 to Quarter one of 2018 versus a 6.5 growth In total assets in that same time frame So what we can see here looking at the Last four quarters is that total Liabilities grew significantly faster Than total assets at a rate of more than Double now current assets on the other Hand do not have coverage of current Liabilities right now that coverage Ratio is around a 0.87 to 1 as of Quarter one of 2018 and I always like to See a company that has coverage of Current liabilities their current assets Do not cover their current short-term Debt obligations now as far as that debt Goes for Disney Disney has close to a 50 50 split of short-term and long-term Debt however we should note that Long-term debt increased 51.4 percent From 2014 to 2017. so what we can gather From looking at the liabilities here is That current assets do not have coverage Over current liabilities that is not a Good thing to see with an investment and Debt growth is definitely outpacing Asset growth moving on now we are going To look at the net cash flow from

Operations as well as the total revenue Cost of Revenue and gross profit so what We can see here is that net cash flow From operations declined from 2016 to 2017 and net cash flow from operations Has also declined in the last three Quarters Now net income declined from 2016 to 2017 however net income significantly Increased from quarter four of 2017 to Quarter one of 2018. total revenue Decline from 2016 to 2017 while cost of Revenue increased and that is something I never like to see with an investment That means they spent more money Obtaining Less sales so cost of Revenue Grew 14.7 from 2014 to 2017 while total Revenue grew just 13 percent so cost of Revenue is outpacing total revenue and What we can see looking at gross profit Is it's relatively flat over the last Four years we're not seeing much of any Growth there at all and in fact it did Decline from 2016 to 2017. now we are Going to look at the financial ratios And stockholders equity for Disney again This is not looking very good for Disney Stock stockholders Equity has declined Every year since 2014 and stockholders Equity declined from quarter to of 2017 To quarter one of 2018. so the decline In stockholders Equity is not a positive Sign for Disney investors and also Looking at the current ratio the current

Ratio has declined every year since 2014 Indicating less coverage of current Liabilities and this is a result of them Bringing on more debt without increasing Their current Assets Now on the other Hand we see that gross margin is steady And over 40 percent is great in 2017 it Came in at 45 percent and it's been 46 Percent in the last three years so it's Very consistent and over 40 percent is Fantastic operating margin is steady Around 25 percent profit margin is Consistent around 16 percent and the After tax return on Equity improved Significantly from 2014 to 2016 and Remained at that level for 2017. but now We are going to take a look at the Actual stock performance over the last Year and the last five years we can see That Disney stock has been a frustrating Ride for investors over the last three Years and over the last three years they Have had little to no growth at all and All they have offered investors is the Dividend and as we said that dividend is Around 1.6 percent so Disney stock has Been flat in the earlier years you're Looking at the last five years they were Definitely in growth mode but now they Have been flat altogether over the last Three years and there are other income Investments out there with a much higher Dividend it's seems like Disney has Really transferred from a growth stock

To more of an income stock with little To no growth potential but they aren't Paying much of a dividend compared to Other options out there like at T So if This stock is going to trade like an Income investment going forward there Are definitely better options for income Investors while there are potential Growth catalysts for Disney the future Is largely uncertain as that deal with Fox is held up in regulation right now But even so Disney remains a safe pick For beginners but don't expect any kind Of Stellar growth out of this stock now Over the last year Disney stock is down 4.9 percent compared to a 22 percent Return from the Dow Jones Industrial Average and remember that Disney is a Component of this index and over the Last five years Disney stock is up 89.3 Percent compared to an 80.3 percent Return from the Dow Jones Industrial Average so over the last year Disney Stock has significantly underperformed The down but over the last five years Disney stock has outperformed the Dow Jones Industrial Average and then Finally we will wrap up with some key Financial notes for Disney we were Taking a look at that quarter one 2018 Earnings report and what we found is That media Network Revenue growth was Flat from quarter one of 2017 to quarter One of 2018 however operating income

Fell 12 percent parks and Resorts Revenue was really the only positive for This earnings report as it grew 13 from Quarter one of 2017 to quarter one of 2018 and operating income grew 21 Percent now Studio entertainment Revenue Declined one percent from quarter one of 2017 to quarter one of 2018 while Operating income fell two percent Consumer products and interactive media Revenue declined two percent from Quarter one of 2017 to quarter one of 2018 while operating income fell four Percent and as a result that gave us Total revenue growth of just four Percent in operating income growth of Just one percent so what I'm thinking Looking at all this is that we are Seeing slow to no growth ahead for Disney stock anyways guys that's going To wrap up this video I hope you guys Enjoyed it and I will see you in the Next one

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