Disney Stock - (DIS) Buy it or wait ?
These days everyone is taking about launch of Disney + which is scheduled on Nov 12 2019. There
is lot of hype around the stock for this reason. Because of this, stock
is already advanced 20% + YTD. However, for the past 2/3 years (
since I am monitoring Disney), it vastly under-performed S&P.
Barely moved in last 3 years. This is because of the losing subscribers
for ESPN. So they decided to launch Disney + - their own streaming
service against Netflix and amazon.I believe they had to change the narrative from the current ESPN story to more streaming one. They acquired BAMTech for this and invest heavily in it. They are investing in close to 800 million in the upcoming quarter (Already invested billions in it). And they have to keep investing in Disney + in original content in order to compete with netflix , amazon, hbo max, cbs , etc etc.
In other words, Its already a crowded space with
companies competing with each other to get subscribers. They will be
competing against netflix which is already spending billions on original
content.(12 billions in 2018). They are ,however, the best candidate to compete against Netflix, this is because of the great Disney content - Disney, marvel, Lucas films, Pixar, ABC, 21 fox, etc
In my opinion, it will be years till
they make good return on Disney +. Netflix just released the quarterly
results recently and their revenue was $4.71 around billions and out of this their profit was $271 million ( around ) . And they have the biggest subscribers in the world ( not US).
Disney
has one of the rare competitive edge that no one has - IP (
intellectual property - brand like Disney, Pixar, marvel) . In my
opinion, if they want to fully monetize this, they have to invest more in - PARKS ( they are already doing that but not heavily ) . They already have the monopoly in that sector, so why not make it main focus. In today's earning call, they talk more than half of the time about the DTC services ( not Micky Mouse or Avengers , - DirectToCustomer). That's their story - Streaming with massive content.
In my opinion, they should invest heavily
in parks. Making them the best tech place with VR/ AR. Rides are just
one thing, they need to transform the whole visitor experience. With
realistic fight against Theanos, using not to be seen VR/ AR . They need to invest in technology and research on how to make park like a most realistic experience ever.
In
conclusion, it's better to invest where they have the most competitive
edge rather than a already saturated market ( too late to join the
streaming party). Based on the current markey, Disney looks expansive compared to its past 5 year P/E. Soon the DTC euphoria will fade and price will go down.
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