Disney: Happy Ending?

Disney is a big, complicated business, which makes it challenging for analysts to give it a specific “intrinsic value”. And with all the boardroom drama with activist investor Nelson Peltz, Disney is not as much fun to analyze, let alone forecast. Thankfully, we don’t have to go there to consider investing in Disney. See chart below.

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The point of creating something like The Buycaster is to relieve us of the onerous (and often futile) task of calculating precisely wrong values for businesses and their stocks. Instead, I’ve found, through experience and tutelage, that it’s best to boil it all down to what really drives stock prices: the difference between market expectations of future growth and the reality that ensues.

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The Buycaster boils Disney (and about 7,000 other stocks) down to these salient factors:

1. What revenue growth do we need to believe to consider buying the stock? This is The Buycast.
2. Is The Buycast believable? That’s the million-dollar question.
3. What happens to the stock if that revenue growth doesn’t come to pass.

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Here’s the main chart from The Buycaster that the rest of the dashboard carefully analyzes.

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And here are the assumptions that go behind the chart shown above:

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As you look through charts, try to map CEO Bob Iger’s strategy over the next few years onto the numbers shown above to – subjectively – validate The Buycast. Here are the main highlights of Bob Iger’s second outing as Disney CEO:

1. Make ESPN a sports-streaming juggernaut.
2. Keep chipping away at reducing operating costs and improving operating margins.
3. Invest $60 billion over the next few years – mostly in Parks & Recreation.
4. But keep Disney+ as the core product of the company.
5. Make Disney+ consistently profitable in the next couple of years.

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If you open the Buycaster, you’ll see that it has already done the quantitative validation of The Buycast. The subjective validation depends on whether you think Iger’s strategic imperatives will drive Disney’s revenue growth up to that 7-8% a year range. If so, DIS could be a buy!

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Note: I hold DIS in one of my portfolios. But the contents of this newsletter should NOT be construed as investment advice. Please do your own research – tools like The Buycaster help you do that efficiently.

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Many Happy Returns,

Saurav