The Walt Disney Company

DIS Details

The Walt Disney Company (NYSE: DIS) operates as a worldwide entertainment company. Its operating segments are 1) Disney Media and Entertainment Distribution (DMED), which is engaged in the global film and episodic television content production and distribution activities and 2) Disney Parks, Experiences and Products (DPEP), which operate theme parks and resorts, cruise lines, vacation clubs and others as well as licensing and sale of branded merchandise through retail, online and wholesale channels. As of November 18, 2021, the company’s market capitalization stood at USD 285.89 billion.

Latest News:

• Launch of Sensational Six Inspired Stay-Cation: On November 16, 2021, DIS launched Mickey and Friends Stay True: Stay-Cation, a Mickey and Friends (AKA Sensational Six) inspired campaign that includes their interests in cuisine, arts and fashion, and pets and plays.
• Disposal of Stake: On October 28, 2021, DIS and the founding family of Fox TeleColombia & Estudios TeleMexico agreed to sell a majority stake in the acclaimed Spanish language content company Fox TeleColombia & Estudios TeleMexico to ViacomCBS Networks International (VCNI), a subsidiary of ViacomCBS Inc. VCNI will operate Fox TeleColombia and Estudios TeleMexico in collaboration with the founding family.

Q4FY21 Results:

• Surge in Topline: The company reported YoY growth of 26.02% in total revenue to USD 18.53 billion in Q4FY21 (ended October 02, 2021) compared to USD 14.71 billion in Q4FY20 (ended October 03, 2021). The DMED segment, representing 70.59% of the total revenue in Q4FY21, improved 9.27% YoY, whereas the DPEP segment expanded 99.41% YoY.
• Improved Profitability: DIS reported a net income of USD 159 million in Q4FY21 vs. a net loss of USD 710 million in Q4FY20.
• Cash and Debt Position: As of October 02, 2021, the company had cash & cash equivalents of USD 15.96 billion and total debt of USD 54.41 billion.

Key Risks:

• Risk Related to COVID-19 Pandemic: DIS operates in the entertainment industry, which suffered a massive hit due to the outbreak of the COVID-19 pandemic. The imposition of lockdowns and travel restrictions to prevent its spread led to a sharp decline in global commercial activity across the industry. Should this declining trend continue, it could harm the financials of the company.
• Competition Risk: DIS faces direct competition from various alternative providers of similar products and services and other forms of entertainment. Should this competition intensify further, it could harm the company's prospects.

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.

DIS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

DIS' share price has declined 14.98% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 140.86 to USD 203.02. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 26.91. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 200.01.

Considering the correction in the stock price in the past nine months, strong top and bottom-line performance, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 155.58, down 1.11% as of November 18, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.   

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