Company History
Disney is one of the most well-known and iconic companies in the world. The company was founded in 1923 by brothers Walt and Roy Disney. Over the years, Disney has created some of the most popular and well-known films and TV shows in history. The company is currently headed by Bob Iger and has a market cap of over $240 billion. Disney is expected to continue to grow and dominate the entertainment industry, which is why investors are so bullish on the company’s future.
This company has a long history. If you love movies and you grew up in the 60s, 70s, 80s, or 90s, you may find nostalgia within. Otherwise, skip past this section to learn about the business model.
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In 1923, Walt Disney was living in Kansas City, MO. He created a short film titled Alice’s Wonderland. He then moved to Hollywood to work with his brother Roy Disney to create a series of Alice Comedies. These comedies were distributed by Margaret J Winkler of M.J. Winkler Productions for a price of $1,500 per reel. This is the equivalent of $24,000 in today’s dollars.
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The company was founded in 1923 by Walt and Roy Disney. It was originally called the Disney Brothers Cartoon Studio. The company also went by the names The Walt Disney Studio and Walt Disney Productions. They were originally a leader in the animation industry before diversifying into live-action film, TV, and theme parks.
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In 1926, they renamed the company Walt Disney Studio.
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After the Alice comedies, they created a series of short films about a rabbit named Oswald. The series was produced by Winkler Pictures and distributed by Universal Pictures. Universal owned Oswald, so Disney made a few hundred dollars in total, even after completing 27 shorts and losing the contract.
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After the loss of Oswald the Lucky Rabbit, Disney came up with the idea of a mouse character on a train headed to California. The mouse was later named Mickey Mouse. The first animation starring Mickey Mouse was Steamboat Willie. This ended up being a major success due to Mickey’s appealing personality and the synchronization of sound to the film.
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In 1929, Walt Disney and his team at Disney Brothers Cartoon Studio began production on the first “Silly Symphony” series, which was distributed by Columbia Pictures. The series was a huge success, and it paved the way for future Disney animated films.
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In 1929, the company was reorganized and renamed Walt Disney Productions, Limited. Walt and his wife owned 60% of the company, while Roy owned 40%. That same year, they published their first Mickey Mouse comic strip in the New York Mirror newspaper.
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In 1932, they signed an exclusive contract with technicolor to produce cartoons in color, starting with the animation Flowers and Trees.
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Disney started production of its first feature-length film, Snow White and the Seven Dwarfs, in 1934. The film premiered in December of 1937 and was the highest-grossing film of that time.
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After the success of their first feature film, the company decided to produce more, including Pinocchio (1940), Fantasia (1940), Dumbo (1941), and Bambi (1942).
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The box office profits of Disney’s animated films started to decline after the outbreak of World War II in 1939. In fact, after the Pearl Harbor attacks on December 7th, 1941, many of Disney’s animators were drafted into the armed forces. The US and Canadian governments drafted the studio to produce training and propaganda films. By 1942, 90% of its 550 employees were working on war-related films. Some of these films included Victory Through Air Power and Education for Death which were meant to increase public support of the war effort.With limited staff and little operating capital during and after the war, Disney’s feature films were “package films” or in other words a collection of short films.
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In 1950, the studio released Cinderella which was also a major success and put Disney back on the production fast track. Other films that soon followed included Alice in Wonderland (1951), Peter Pan (1953), and Disney’s first all-live action feature, Treasure Island (1950). Other early all-live-action Disney films included The Story of Robin Hood and His Merrie Men (1952), The Sword and the Rose (1953), and 20,000 Leagues Under the Sea (1954).
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In 1950, Disney teamed up with Coco-Cola for its first venture into television, an NBC network special called One Hour in Wonderland.
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Disneyland, which opened in California in 1955, attracted people from all over the world. In 1959, Disneyland introduced America’s first monorail system to increase the speed of transportation around the theme park.
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Disney focused its talents on TV through the 1950s by creating weekday afternoon children’s programming such as the Mouseketeers, Davy Crockett, and Zoro. The company’s film studios also increased production, releasing 5 to 6 movies per year, including Lady and the Tramp (1955), Sleeping Beauty (1959), and One Hundred and One Dalmations (1961).
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The company began construction of Disney World in Bay Lake, FL in 1965.
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On December 15th, 1966, Walt Disney passed away from complications caused by lung cancer. After Walt’s death, his brother Roy took over as chairman, CEO, and President. One of Roy’s first acts was to rename “Disney World” to “Walt Disney World” in honor of his brother.
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In 1967, Walt Disney released two final films: The Jungle Book and The Happiest Millionaire.
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In 1969, two films were released that featured live actors, including The Love Bug and The Computer Wore Tennis Shoes.
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Disney World opened on October 1st, 1971 with Magic Kingdom.
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On December 20th, 1971, Roy passed away from a stroke. The company was then under the control of Donn Tatum, Card Walker, and Walt’s son-in-law Ron Miller. Each was trained by Walt and Roy.
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They released Escape to Witch Mountain, Freaky Friday, Robin Hood, The Rescuers, and The Fox and the Hound throughout the 1970’s.
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Miller, as head of the studio, attempted to make films more appealing to the teenage market by creating a science fiction film, The Black Hole, in 1979. However, the success of Star Wars overshadowed The Black Hole and it became the first Disney film to carry a PG rating in the US. Disney then dabbled with the horror genre with The Watcher in the Woods in 1980 and more sci-fi with Tron in 1982, both of which generated marginal success.
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In 1979, Disney partnered with Paramount Pictures to produce films such as “Popeye” and “Dragonslayer”.
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In 1982, Walt Disney World opened EPCOT Center.
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In 1983, the movie Mickey’s Christmas Carol was released and it was a major hit.
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Touchstone Films was created in 1984 in order to help produce more live-action movies. The first release was Splash (1984).
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The parks were generating Disney’s revenue by the early 1980s.
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In 1984, Saul Steinberg’s firm Reliance Group Holdings attempted a hostile takeover of Walt Disney Productions, but the deal was called off after Disney bought out Reliance’s stake in the company. Another shareholder filed a lawsuit claiming the deal devalued Disney’s stock, but the suit was settled in 1989 for $45M.
In 1984, MCA attempted to purchase Disney, but the deal fell through because of disagreements between MCA chairman Lew Wasserman and Disney CEO Ron Miller.
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In 1987, Michael Eisner was brought over to Disney from Paramount to lead Disney as CEO. Eisner’s vision was for Disney to continue to make movies. Some of the successes included Good Morning, Vietnam (1987), Dead Poets Society (1989), and Pretty Woman (1990). Eisner helped expand distribution deals with long-term deals with networks including Showtime.
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Disney had a wave of success with animations in the late 1980s and early 1990s, with movies such as “Who Framed Roger Rabbit”, “The Little Mermaid”, “Beauty and the Beast”, “Aladdin”, and “The Lion King”. The company also entered the TV market with shows such as “DuckTales”, “Chip ‘n Dale: Rescue Rangers”, “Darkwing Duck”, “TaleSpin”, “Bonkers”, and “Gargoyle’s”.
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In 1989, Walt Disney World opened Hollywood Studios, which is a theme park.
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In 1991, Disney’s revenue from hotels, home video, and merchandise was 28%.
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In 1993, Disney acquired Miramax Films with the goal of broadening its adult-focused content. The same year, Disney created the NHL team the Mighty Ducks of Anaheim, named after the 1992 hit film. Disney also purchased a minority stake in the Anaheim Angels baseball team.
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In 1994, Eisner made an attempt to purchase NBC from GE but the deal failed because GE wanted to keep 51% of ownership in the network.
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In 1995, Disney announced a merger of equals with Capital Cities/ABC Inc. for $19B.
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In 1998, Animal Kingdom, a Walt Disney World theme park, opened.
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In 1999, Disney Cruise Line was launched.
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In 2005, Bob Iger replaced Michael Eisner as CEO.
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In 2006, Disney bought Pixar for $7.4B.
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In 2009, Disney bought Marvel Entertainment for $4.24 billion.
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In 2011, Disney began construction of Shanghai’s Disney Resort. The project cost $4.4B and opened in 2016.
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In 2012, Disney bought Lucasfilm for $4.05 billion.
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In 2020, Bob Chapek replaced Iger as CEO. Iger assumed the role of Executive Chairman, which he would use to oversee the creative side of the company.
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In April of 2020, Iger resumed operational duties to help the company through Covid-19. At that same time, the company announced that it would stop paying for 100,000 employees, which is estimated to save the company $500M a month. Although the pay was halted, healthcare benefits remained in place.
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Although Covid-19 has impacted this stock negatively, the tide may be turning. We’ll touch on that in the news.
Business Model
Disney is a publicly traded company and its stock is traded on the NASDAQ Global Select Market. Disney has a business model that relies on the production and distribution of motion pictures, television programming, and theme park experiences. The company’s main sources of revenue are ticket sales, advertising, and merchandise. In recent years, Disney has invested in new businesses such as streaming services and theme park expansions. The company’s future is uncertain, but it is likely to continue to produce high-quality content that will attract customers worldwide.
Disney generates revenue from a variety of different sources, including its parks and resorts, cable networks, and streaming services. The company also generates revenue from sales of content and licensing agreements.
News
This article from cnbc.com reports that Disney’s EPS was $1.06, which was higher than the expected $.63. The article also reports that Disney’s revenue was $21.82B, which was higher than the expected $20.91B. Additionally, Disney’s total subscriptions for Disney+ were reported to be 129 million, which was higher than the expected 125 million. These are great signs for shareholders.
This article from investopedia.com reports that Q1 revenues from Parks, Experiences, and Products were up $7.2B from $3.6B in Q1 of 2021. This is a great sign.
This article from fool.com reports that Disney has just opened a new theme park in Hollywood Studios in Florida called Star Wars: Galactic Starcruiser. The two-night Star Wars-themed adventure costs almost $5,000 for two people. Although this is a high price tag, Star Wars fans around the world with some disposable income are eager to see this resort. Disney is expected to generate about $80M per year on lodging from this resort on its own.
Disney is partnering with Samba TV to improve its data tracking with advertising. This will allow Disney to better track the content people are watching and turn around and sell more focused advertising. This will result in Disney offering higher-quality advertising placement which allows Disney to charge more for advertising, and improve its data tracking capabilities.
This article discusses Covid-19 in relation to other viruses, and how it may be less dangerous over time. However, it is important to note that there is no guarantee this is true, and we should still observe this virus closely and take precautions.
Competitive Comparison
Disney is a well-known and highly respected company with a long history of creating quality entertainment products. As a result, Disney stock is often compared to other major entertainment companies, such as Comcast (NBCUniversal) and Time Warner (TWX).
Netflix (109 million), Amazon Prime Video (90 million), Hulu (27 million), HBO Now (2 million).
We’ll address this within the 4 M section.
- Netflix: 221M
- Amazon Prime: 148M
- Disney+: 129M
- HBO: 73M
- Hulu (Owned by Disney): 43M
- Paramount+: 32M
- ESPN+ (Owned by Disney): 17M
- Peacock: 9M
4 Ms
MOS (Margin of Safety):
Disney’s Mos is a key metric that investors use to measure a company’s financial stability. A high Mos indicates that the company is able to withstand potential financial losses, while a low Mos suggests that the company may be more vulnerable to unexpected events. Disney’s Mos has been relatively stable in recent years, indicating that the company is prepared for potential challenges. However, investors will be closely monitoring Disney’s Mos in the future as the company continues to expand its operations and make large investments in new businesses.
Meaning:
Disney stock is up significantly in the past year, with analysts predicting even more growth in the future. This is likely due to the success of Disney’s newly released films, such as “Beauty and the Beast” and “Guardians of the Galaxy.” Disney is a well-known and trusted brand, which has led to increased demand for its products. In addition, Disney has been making strategic investments in other businesses, such as Hulu and ESPN, which could further increase its value.
Disney has 4 major revenue channels, 3 of which are doing well. If Covid-19 continues to be less dangerous, this means Parks, Experiences, and Product revenue will increase.
Moat Disney Stock :
The Moat Disney Stock analysis found that the company has a strong balance sheet, is profitable, and has a history of rewarding shareholders. The company also has a strong brand and is well-positioned to take advantage of future growth opportunities.
Disney parks offer a nostalgic experience that is unique from other theme parks around the world. The strong moat around the Disney park business means that it is difficult for competitors to steal market share. Meanwhile, Disney’s new streaming services (Disney+, Hulu, and ESPN+) face strong competition from Netflix, HBO, and Amazon.
The price for each platform is relatively low at this point, so consumers are likely to own more than one platform. However, with the recent additions of Paramount+ and Peacock, consumers may start to pick and choose which platforms they want to pay for and which ones they’re willing to let go. In the case of Disney+, the key is to continuously generate new content, both movies and TV series, to keep subscribers interested. So far, it looks like Disney+ is doing a great job of that.
Management Disney Stock :
Disney is a company that has been around for many years and has a lot of experience in the entertainment industry. They have a lot of products that are popular with children and adults alike. Disney is currently in the process of expanding their business into other areas, such as theme parks and consumer products. They have a lot of potential and it is unclear what the future holds for them. However, they are a well-known and well-respected company, and their products are sure to be popular for years to come.
Bob Chapek has been CEO of Disney since 2020. Chapek has worked at Disney for about 30 years, with previous roles including Chairman of Disney Parks, Experiences, and Products. He is known for his strong focus on consumer service and experience.
He wants people to visit the parks not only once, but multiple times. Chapek has also had a lot of experience leading different divisions of the company, including his work as President of Distribution for Walt Disney Studios. His knowledge about the Parks, Experience and Products is invaluable at this point in time. Given that covid-19 appears to be on its way out, he needs to find ways to bring people back to the parks.
Financials
Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
The income statement shows how much money the company made in each fiscal quarter. The cash flow statement tells you how much money the company has available to pay its bills. The balance sheet tells you how much money the company has in total assets, total liabilities, and total equity. All three of these statements are important because they help you understand the health of the company. Overall, Disney had a good year in 2018. They made a total of $51.2 billion in revenue, and they had a net income of $5.5 billion. They also had a positive cash flow of $8.5 billion.
Disney’s stock price has been on a steady climb since Donald Trump was elected president in 2016. The main reason
Revenue (Found on the Income Statement)
2018: $59B
2019: $69B
2020: $65B
2021: $67B
Revenue did not take a substantial hit in 2020 and 2021. This is a good sign.
Revenue (Found on the Income Statement)
2018: $12.5B
2019: $11B
2020: -$2.8B
2021: $1.9B
Net Income has increased in 2021. It’s not near the highs in 2018 and 2019 but the company is moving in the right direction.
EPS (Found on the Income Statement)
2018: 8.4
2019: 6.64
2020: -1.58
2021: 1.38
EPS has also increased in 2021 which is a great sign.
Free Cash Flow (Found on the Cash Flow Statement)
2018: $9.8B
2019: $1.7B
2020: $3.5B
2021: $1.9B
Free Cash Flow has slightly declined in 2021. We want to see this number increase. This may be related to the expenses on the construction of the new theme park, Star Wars: Galactic Starcruiser.
Total Assets (Found on the Balance Sheet)
2018: $98B
2019: $193B
2020: $201B
2021: $203B
Total Assets have still increased. This is a great sign.
Total Liabilities (Found on the Balance Sheet)
2018: $45B
2019: $105B
2020: $113B
2021: $110B
The Total Liabilities have slightly decreased since 2020 which is a great sign.
Total Debt (Found on the Balance Sheet)
2018: $20B
2019: $46B
2020: $58B
2021: $57B
The debt has slightly declined which is a great sign.
Total Equity (Found on the Balance Sheet)
2018: $48B
2019: $88B
2020: $83B
2021: $88B
The Total Equity has remained relatively flat which is okay.
If you are a shareholder in Disney, it looks like good news is coming your way. Although the financials are not great at this exact moment, their Parks, Experiences, and Products revenue channel is starting to see signs of improvement. It is also impressive to see the continuous growth of Disney+, Hulu, and ESPN+. This may be a great time to put Disney on your watchlist. If that score jumps to 10/20, this stock could change to Watch. And if the MOS changes to 50%, it would be a good time to buy.
This stock could be on sale soon. If the score and MOS improve on the next quarterly reports, this may be a good time to add it to your portfolio.
