Disney Investors Display Incredible Faith, , on October 6, 2020 at 11:30 am

By
On October 6, 2020
Tags:

(Bloomberg Opinion) — There are no fireworks over Cinderella Castle these days, and yet investors remain captivated by Walt Disney Co. Are they caught up in fantasy?The whimsical palace overlooking Disney’s Magic Kingdom in Orlando, Florida, has long stood as a symbol of the company and its status as both a source of enchantment and an impenetrable fortress in the entertainment world. Like the castle, Disney is well built, stately and admired, and it’s surrounded by an ostensibly protective moat. But much has changed this year. Operating profit — normally driven by the company’s theme parks and cable-TV networks such as ESPN — plunged 98% in the three months through June 27 from a year earlier as the Covid-19 crisis took aim at every single one of Disney’s lines of business.Despite that, investors foresee happily ever after. They value shares of Disney at 44 times forward earnings estimates. That’s a 75% premium to the S&P 500 Index’s average earnings multiple. It’s also rich by Disney standards; the stock price has had an average multiple of just 20 over the last five years. Comcast Corp. at least has one stable business — broadband internet — but it’s left with a price-to-earnings ratio of only 16. Meanwhile, profit projections for Disney look like this:Translation: Investors are such firm believers in Disney’s prospects that they’re willing to pay now for 44 years worth of potential earnings. It’s simply remarkable considering all that Disney is up against. A company whose revenue is directly tied to packed public venues such as movie theaters, theme parks and sports arenas has been largely inoperable for much of the year. The planned expansion of its cruise-ship fleet has been put on pause. Movie and streaming projects also were halted as, for a time, were sports. It’s not clear what any of these revenue sources will look like after the pandemic, which may have lasting effects on society and consumer behavior. And Disney is facing all of this with new leadership. Even now, movie theaters don’t have enough releases or patrons to justify staying open. And while Disney World is back welcoming visitors (with crowd limits), the company said in August that it wasn’t seeing as much of a rebound as expected. A recent Morning Consult survey found that 42% of U.S. adults wouldn’t feel safe visiting an amusement park even six months from now. As California prevents Disneyland from reopening because of the lingering threat of the virus, Disney said it would let go 28,000 U.S. theme-park workers. The Disney+ app has proved popular in the meantime, and streaming is considered a bright spot for Disney — bright red if you’re talking financial statements, though. Analysts expect the streaming business to lose more than $2 billion in the new fiscal year that began last week. The company is set to report its latest quarterly results Nov. 12.Cinderella Castle may still be the perfect metaphor for Disney. To onlookers it’s a magnificent towering structure, but the castle was made to look grander than it actually is. At only 189 feet, it barely tops Spaceship Earth, the big sphere at Epcot. The Empire State Building in New York is seven times taller.Perhaps Disney’s future becomes a bit of an optical illusion, too: Can the company shrink methodically into a smaller version of its pre-Covid self while still earning similarly impressive profit margins and wielding the same influence as it did before? That’s difficult to answer, but it seems like a probable strategy. The retail industry is already trying this, embracing boutique storefronts over sprawling floor plans, because for them shrinking means survival.Disney investors can’t possibly be betting on a total return to normal, nor would a reasonable person expect that the economics of the streaming business could ever supplant Disney’s traditional profit powerhouses. But maybe there’s still a way for investors to get their fair- tale ending. This is Disney, after all. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

Disney Investors Display Incredible Faith(Bloomberg Opinion) — There are no fireworks over Cinderella Castle these days, and yet investors remain captivated by Walt Disney Co. Are they caught up in fantasy?The whimsical palace overlooking Disney’s Magic Kingdom in Orlando, Florida, has long stood as a symbol of the company and its status as both a source of enchantment and an impenetrable fortress in the entertainment world. Like the castle, Disney is well built, stately and admired, and it’s surrounded by an ostensibly protective moat. But much has changed this year. Operating profit — normally driven by the company’s theme parks and cable-TV networks such as ESPN — plunged 98% in the three months through June 27 from a year earlier as the Covid-19 crisis took aim at every single one of Disney’s lines of business.Despite that, investors foresee happily ever after. They value shares of Disney at 44 times forward earnings estimates. That’s a 75% premium to the S&P 500 Index’s average earnings multiple. It’s also rich by Disney standards; the stock price has had an average multiple of just 20 over the last five years. Comcast Corp. at least has one stable business — broadband internet — but it’s left with a price-to-earnings ratio of only 16. Meanwhile, profit projections for Disney look like this:Translation: Investors are such firm believers in Disney’s prospects that they’re willing to pay now for 44 years worth of potential earnings. It’s simply remarkable considering all that Disney is up against. A company whose revenue is directly tied to packed public venues such as movie theaters, theme parks and sports arenas has been largely inoperable for much of the year. The planned expansion of its cruise-ship fleet has been put on pause. Movie and streaming projects also were halted as, for a time, were sports. It’s not clear what any of these revenue sources will look like after the pandemic, which may have lasting effects on society and consumer behavior. And Disney is facing all of this with new leadership. Even now, movie theaters don’t have enough releases or patrons to justify staying open. And while Disney World is back welcoming visitors (with crowd limits), the company said in August that it wasn’t seeing as much of a rebound as expected. A recent Morning Consult survey found that 42% of U.S. adults wouldn’t feel safe visiting an amusement park even six months from now. As California prevents Disneyland from reopening because of the lingering threat of the virus, Disney said it would let go 28,000 U.S. theme-park workers. The Disney+ app has proved popular in the meantime, and streaming is considered a bright spot for Disney — bright red if you’re talking financial statements, though. Analysts expect the streaming business to lose more than $2 billion in the new fiscal year that began last week. The company is set to report its latest quarterly results Nov. 12.Cinderella Castle may still be the perfect metaphor for Disney. To onlookers it’s a magnificent towering structure, but the castle was made to look grander than it actually is. At only 189 feet, it barely tops Spaceship Earth, the big sphere at Epcot. The Empire State Building in New York is seven times taller.Perhaps Disney’s future becomes a bit of an optical illusion, too: Can the company shrink methodically into a smaller version of its pre-Covid self while still earning similarly impressive profit margins and wielding the same influence as it did before? That’s difficult to answer, but it seems like a probable strategy. The retail industry is already trying this, embracing boutique storefronts over sprawling floor plans, because for them shrinking means survival.Disney investors can’t possibly be betting on a total return to normal, nor would a reasonable person expect that the economics of the streaming business could ever supplant Disney’s traditional profit powerhouses. But maybe there’s still a way for investors to get their fair- tale ending. This is Disney, after all. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

,

Instant Quote

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

High West Capital Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

High West Capital Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with High West Capital Partners, LLC’s internal lending policies. High West Capital Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Singapore

168 Robinson Road
#12-01 Capital Tower
Singapore 068912

New York

Coming Soon!

Dubai

Coming Soon!

Market Coverage