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In the past years, Disney (NYSE: DIS stock) has been severely affected by the pandemic, even suspending its dividend at some point. However, the company is now recovering, and with the stock down at the levels from a decade ago, there might be some potential here.
So far, this year, the company has produced around $3.6 billion worth of free cash flows, which is already better than what they did since the pandemic started.
Looking into a previous report from half a year ago, we can see three interesting things. Number one: they plan to spend around $6 billion in CAPEX this year, which, if true, means that they would have to spend another roughly $2 and a half billion in the following Q, so the free cash flow would likely be around $0 in Q3 – or, Q4 for them. This is around twice the usual so unless they are preparing something big, it’s not likely to happen, but who knows, maybe they are going to announce something.
Then, there is this plan to reach 5 and a half billion worth of savings, most of it coming from marketing and labor costs. This thing alone can be a huge improvement for Disney, and they could become even a $10 billion free cash flow company again. This is going to be very important later in the valuation.
And, one more thing, following the company’s recovery from the pandemic, they said that they are optimistic about their ability to declare a modest dividend by the end of the year. If they do that, we can expect the market to show some interest in Disney again.
Looking into the company’s debt, we see that Disney has current liabilities of $28.2 billion and around $65 billion in long-term ones. With current assets of $30 billion, they are going to rely on the current cash flows, but they should be fine.
The main issue with a valuation for Disney is the value of Disney+. I – really – don’t think comparing it to Netflix’s value is a good idea, because that’s not an indicator of a fair value, but rather how crazy the market could get. Netflix is barely profitable and in a very competitive industry, yet for the market, it is worth almost $200 billion, which is more than the whole of Disney and over 100x the free cash flow. If you ask me, with all the competition from huge companies like Apple and Amazon, Netflix is worth at most $20 billion. You can see that the issue for Netflix is coming from an operating cash flow level, not because of high CAPEX or something like that. There are $20 billion dollar companies out there with higher potential that are much more profitable than Netflix.
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0:00 Disney (NYSE: DIS) Stock Review
0:25 Disney Dividend Back Soon & More
1:27 Disney+ Value & Disney+ vs Netflix
4:42 Disney Stock Valuation + Price Target
#stocks #investing #personalfinance #valueinvesting
3 Comments
Here is my updated analysis for Disney (NYSE: DIS stock). I go through Disney's financials, talk about their potential recovery from the pandemic (as well as Disney+ vs Netflix) before I finish with a fair value estimation and my entry price target. Don't forget to like and subscribe if you appreciate what I do!
awesome video Andrew!! For me the entry point would be around 60$!
When AAPL buys DIS, you will see a share price reaching 120, if not more. I don't see DIS staying at this price much longer without getting bought by AAPL at a great discount.