Disney Stock Analysis – is Disney’s Stock a Good Buy Today? $DIS Stock Analysis

hi I’m Jimmy in this video we’re looking
at Disney’s stock ticker symbol DIS our goal with this video is to try to better
understand the basics of Disney’s business and then see if we can come up
with a fair value for Disney stock and hopefully we can use this information to
get us closer to our personal goal of achieving financial freedom
okay so let’s dive at a Disney’s business so Disney breaks their business
into four main segments their largest segment is parks experiences and
products that accounted for about 37% of revenue in 2019 clearly this segment is
where they account for their theme park revenue plus Disney accounts for cruise
lines their National Geographic experiences and then the products part
of this particular segment accounts for the licensing of their trade names their
characters the sale of their branded merchandise things along those lines so
clearly this is a massive part of their business that frankly this part of their
business seems to have a very nice moat around it there’s a there’s very few
brands around the world then I think have the clout that Disney has
especially in their branded products and characters okay
then their next largest segment is their media networks which is kind of about
35% of revenue in 2019 Disney media networks they operate their Disney
branded channels like Disney Disney and Disney Junior things along those lines
they also have free form FX National Geographic they have the ABC television
network they own 50% of A&E a few more brands along those same lines most of
the money in this segment is generated through advertising affiliate fees and
the distribution of their content onto other platforms now one thing that I’ve
always found interesting about Disney as a business or even as a brand is how
interconnected these four segments really are I have two kids myself and
they love Disney they watch Disney movies they watched the Disney Channel
and then they really because of they watch all of those they really want to
go to the Disney theme parks so I’ve personally always been impressed with
the Disney business model where the strength of each brand of each business
line that they have fuel the other lines where there’s only a few content
creators out there that have a decent moat to their business
Disney is one of them because many of the top Disney movies as an example well
those Disney movies turn into theme park rides and they obviously sell
merchandise behind it so I think that they have a very strong brand and
there’s something to be said for that from an investing standpoint so I’m
guessing you could tell it I’m a fan of Disney as a business in general now
let’s finish running through the rest of these other two segments and then we’ll
see if we could value Disney stock okay so next up we have their studio
entertainment business which accounted for about 16% of revenue from 2019 and
this is where their Disney movies are accounted for from a revenue perspective
so things like Marvel Pixar Lucasfilm and the list goes on and on – the amount
of brand or – the amount of movies that they ultimately create and then this
brings us to the direct-to-consumer business which is it this houses the
highly anticipated Disney Plus that’s where Disney Plus now resides in 2019
it’s the counter for about thirteen percent of revenue although this is
anticipated to grow quite quickly since Disney Plus has really pushed out strong
they also have ESPN Plus this is also where they have Hulu which Disney owns
about 67 percent of so Disney Plus launched in November of 2019 in the
United States and in four other countries and they plan on launching in
Western Europe I believe in the spring of 2020 Eastern Europe in late 2020 and
then Latin America I believe in 2021 and I know that they launched in a few
Asia’s asia-pacific regions they’re trying to launch in a few a few
different asia-pacific regions over that same time period 2020 2021 so far the
Disney Plus rollout has been a very strong move for Disney they had about 10
million people sign up on the first day and I heard that after the first three
months or so there are almost 30 million people that had signed up and this is
impressive growth and frankly it’s been causing quite a stir when it comes to
their stock so this is Disney’s historical pressed
earnings ratio going back the past few years and as we could see there was a
huge spike in their price to earnings ratio recently now this bike is how much
investors are willing to pay for each dollar of earnings per share so in
theory if it’s trading in a 30 times P multiple that means you’re willing to
pay 30 dollars for one dollar of earnings now one of the reasons that
investors are willing to pay more now is partially because of the growth that
they’re showing Disney Plus is bringing in a new line of business and a new line
of growth and naturally many people are willing to pay more money for more
growth this is logical this is expected the second thing is that earnings per
share is actually pulled back over the past year as Disney has finished up the
merger with 21st Century Fox and then they launched Disney Plus clue there’s
going to be costs associated with that so in doing that earnings per share over
the past year have fallen and many investors are willing to sit and wait
for Disney stock for the long run there are many long-term investors in this
type of investment so the fact that earnings pull back over the past year
maybe next year is somewhat expecting they’re willing to do that if they
expect the pace to continue on the future years now for me I personally
prefer to use a discounted cash flow valuation method this is what that
valuation method looked like and if it cures how to perform this type of
analysis actually did a whole video on how to work through this I’ve got an
Excel template that I built I’ve got links in the description to a blow to
that video so I’m not going to really go through it here but basically what I did
is I took analyst estimates for future free cash flow and I discounted that by
a required rate of return of eight and a half percent that’s been about what I’ve
been using lately eight and a half percent now I know that this number can
be a very subjective number basically the required rate of return says that
how much do I need for this return how much of an have returned do I need on an
annual basis for this investment to make sense if you want less of a return you’d
be willing to pay a higher price for this stock higher return you willing to
pay a lower price okay simple enough then I use the perpetual growth rate of
two and a half percent this is typically what I like to use I’m a big fan of two
and percent here because we’re the perpetual
growth rate is also somewhat subjective it’s not nearly as subjective as the
required rate of returns I use two and a half percent because in theory this is
the expected growth rate of GDP so I assume that at some point beyond the
initial growth period Disney will grow at two and a half percent forever and
they could maintain that pace assuming they just kept up with what GDP was
growing yet now let’s imagine that we thought that Disney would could grow it
five percent forever we used five percent of perpetual growth rate well
that seems a bit unrealistic do we still think GDP is only gonna grow at two or
three percent if that’s true essentially what we’re saying is that
Disney would eventually become larger than the United States because at some
point if one is growing at five percent forever
the other ones growing at two and a half percent forever some point the five
percent one’s going to be bigger and that might be a bit unrealistic although
I do love Disney so maybe but still being more realistic either way that
math gives us an estimated fair value of the company of about one hundred eighty
five billion dollar one hundred eighty five billion dollars divide that by
shares outstanding we get a fair value of about a hundred and two dollars per
share now given that Disney stock is currently
trading at about hundred and forty dollars per share well clearly according
to this valuation method Disney stock seems overpriced today now actually did
a video on Disney towards the end of 2018 and when I did this is the result
of that DCF calculation so at that time for the required rate of return
I used a weight a weighted average cost of capital
that’s what wax stands for and for that I actually used a nine percent required
rate of return and because I used a higher number well that would in theory
lower the fair value of the stock but the key difference that I want to point
out here between this valuation and the current valuation is these shares
outstanding so today there’s about three hundred and some-odd million more shares
than there was back at the end of 2018 now look this likely came out of some of
the acquisitions that they’ve done recently but I was curious if I adjusted
the current valuation method with the old number of shares
outstanding well we came up with a fair value of the stock of about 124 dollars
per share so that’s not too far off of my old calculation but still compared to
today’s price of one hundred and forty dollars per share well I I would still
personally as much of a fan of Disney stock as I am I’m a big fan of their
company in general I’d still like to see the stock fall a bit more before we jump
in for a long term investment now hypothetically if we are okay if we’re
gonna hold this stock for the next thirty years you know a Buffett has said
that I’d rather buy a good stock at or I’d rather buy a great company at a good
price than a good company at a great price so hypothetically if we wanted to
account for that to me this is one of those great companies personally I’ll be
waiting for this stock to fall a little bit before I get involved where do we
get involved well a lot of that depends on what fair value we came up with for
me I’d like to get it below my calculation of fair value today and I
also wish that Disney paid a bit more of a dividend than they do right now they
have a dividend yield of slightly over 1% and I actually did a video on where I
went through with my top five dividend stocks from their sector they there they
list themselves in the communication services sector and I did a video where
I went through my top five stocks they’re not on that list because I had a
self-imposed minimum yield of 2 and a of 2 percent and they are slightly over 1%
so I I wish it they were paying slightly more of a dividend beyond that I think
it makes sense in my mind to wait for this one to pull back we might have to
wait for a market crash or something along those lines to get it there but
I’m hoping it happens if if it does happen this is one of the first stocks
on going after now if you’re curious what those top 5 dividend stocks are
from the communication services sector I did a video on that there’s a link here
there’s a link in the description below and I really want to thank you for
sticking with me all the way to the video hopefully you found this
interesting thanks and I’ll see in the next video

67 thoughts on “Disney Stock Analysis – is Disney’s Stock a Good Buy Today? $DIS Stock Analysis

  1. Nice analysis! DIS was ny second and latest buy. You gotta have some in your portfolio 😁👍

  2. I jut spend an M1 Financial account. I selected Disney along with 8 other S&P 500 companies (UTX, BRK.B, AMZN, AAPL, BMY, GIS, COST, PG) and 3 ETF's (SPLG, FTEC, MGK) to invest in. This account will allow me to purchase fractional shares and will invest any deposit I make at a set percentage I determine. This way I am investing in these companies similar to how szomeopne would buy mutual fund shares.

  3. Thanks for the analysis. Interesting to see shares outstanding increase during acquisitions. IVZ did something similar when they acquired Oppenheimer funds from Mass Mutual. Might have to keep an eye on share buybacks to see if they will return to pre-acquisition levels.

  4. Dividend is low, but is very stable and is likely to keep growing. This is a great long term company to hold throughout retirement, not one where you're expecting to 2x or 3x your cash in a year. Great insight as always!

  5. Been waiting 3 years for it to hit fair value. It only happened one day on christmas eve 2018 And i missed my one and only chance. Finally initiated a small position today and will average down from here. I got sick of waiting.

  6. Disney is one of the big nice content powerhouses!

    A value play for long term and with Disney+ they have also a product for the future.

  7. I own a lot of growth stocks so even at this P/E ratio Disney is one of my more reasonably priced holdings. I'm not selling any Disney and I'm even considering adding more because I'm here for the long term. Still nice to see an in depth analysis of what a fair price would look like. Keep it up!

  8. love your videos but there is s problem with your spreadsheet subscription:

    you are asking for us to click a link in an email you will send us. CLICKING ON LINKS FROM PEOPLE WE DONT KNOW IS A MASSIVE SECURITY RED FLAG.

    I'm quite happy to give email address and be on your community mailing list, I love your content! But asking people to click links in emails is a basic security problem.

    May I suggest you try to change your process since while I love your content and (mostly) trust you, I am not going to risk the security of my main PC and take the chance.

  9. Thanks, I love Disney and am long. My family loves Disney, too, so it’s been a great way to expose them to dividend stocks, as you can understand having your own kids 🙂

  10. Top tier quality content. Absolutely amazing video as always, thank you for all that you do! As a new investor I'm glad I discovered your channel, it has been extremely helpful in helping me learn about the many many different aspects of stocks, the market, and how to analyze the numbers.

  11. Yes Disney will continue to grow at 5% and take over the world! Great analysis! Keep 'em coming! My son loves Disney so I had to buy.

  12. DIS is my # 1 holding and with it stagnant price moment the last 3 months since the pop from 130 to 150 I been slowly but steady increasing my shares. I know you shouldnt put all your eggs in one basket, but I cant help it. Ince it pops over $160 I will stop buying if that ever happens. Lol

  13. You didn't mention that because of Coronavirus, Shanghai and Hong Kong Disneyland is now closing…
    And by the way, many district lockdown, Chinese people can't travel to other countries's Disney, like visiting Disney Japan at this moment.

    so I think it has a serious damage to Disney business, at lease before Coronavirus stop affect China

  14. Hi. amazing chanel. Can you look at the companies of PSI20 (Portugal)? The Navigator Company, Altri, BCP, REN, CTT, Sonae.

  15. Really enjoyed this breakdown Jimmy! Very popular stock, I have a small position in Disney but will be looking for a decent pull back.

  16. I think to say that Disney stock is overvalued is a big understatement. Jimmy I think you will have a long wait for it to come down to anywhere near $102, don't hold your breath!

  17. I got 1st share last year in small long term I'm adding it for my kids. I don't think it will hit 104 unless we have recession. But I'm waiting for it to drop some more too.

  18. Do you think, that the perpetual growth rate shall be considered at 2% instead of 2.5%, considering the latest growth estimates from WEF?

  19. Awesome! I purchased some DIS on December and it's been going down, but not so much, though! I'm keeping it because it will surely soar this year again!

  20. Interesting stat that shares outstanding increased. I think the Disney plus streaming service is highly undervalued at this time. Theme parks are taking a hit with the Corona trending, so a better entry price may be around the corner!

  21. 102 is a bit low… i'm waiting for 135 to pull the trigger. Around 120-125 would be a fair price…But I have no problem with paying a premium for a stable company with alot of growth ahead 🤑

  22. I would like one question to be answered. Why does VISA NEVER DIP? Since they went public, just during their 1st year due to the great recession, they returned -15%, which is not so bad. Since, I believe its THE ONLY STOCK in the whole US market which has only gone up and up during the last 11 years with almost no selling. During late 2018 it went also down -15% to later recover in 4 weeks to previous levels. I like Visa and I believe its a great company, but it just doesn't make sense that one stock never goes down because the stock market was invented to obtain liquidity, there is no reason to hold for 11 years a company which doesn't pay a dividend and doesn't grow at outstanding rates. I really don't understand. World could end tomorrow and Visa would still go up. Even Mastercard has dipped under 50% or gets hit like a normal asset when there are market downturns. VISA even did a split 4-1 in 2014 and instead of dilution provoking price downtrend, it still went up and up, like nothing happened

  23. I doubt that Disney will go down to $ 100, Disney + is coming at the end of March in Europe and the release of box office movies, until that date can be at $ 130, then take off like a rocket and you will not be able to reach it.

  24. You may have a long wait for Disney to drop to $102, but it could happen if a democrat manage to get into the white house. I'm with you though. If it drops back to around $102, I'll load up on the stock. I've been robbed many times by that mouse going to the Disney parks over the years. Might as well join in and make some profit.

  25. Destiny plus is absolutely boring. It will die away soon. Look at their first original series. I was bored with that after 5 episodes. Your video on Ford. Or DuPont. New videos they have new potential.

  26. Thanks for this analysis on Disney. I hold some shares and there are some in my son’s account too. I am really optimistic on this company, especially for the long term. 🏰🐭🌟

  27. Thank you very much for this video Jimmy, there are very few people who are able to expose this level of detail and involvement.

  28. Disney stock sucks and under performing and under appreciated stock. Stay away esp with China and Hong Kong parks closed along with cruise line, resorts…..everything Disney touches is currently dead due to corona Virus.
    Because of scare, not many will travel cruise, stay at resorts, and go to their theme park.
    Just buy Apple or MSFT and stay put at THIS current period. It is not time to buy Disney….I have own it for 2 years and sold everything last week.

  29. Looking at the future of Disney, I’m more bearish on the stock. They’ve done a terrible job with LucasFilm and haven’t even earned their investment back on it. Speaking of which, Galaxy’s Edge, their Star Wars themed park, is based off of the new trilogy, which in my opinion is a badly wasted opportunity.
    I have a feeling Marvel is going to drop off a cliff now that Endgame has been released, they’re scrapping the bottom of the barrel for new characters and doing away with the old ones.
    Disney+ doesn’t have enough content at launch either, there are a lot of instances of people canceling their subscriptions after finishing Mandalorian.

  30. Hey jimmy . Long time sub .Love your videos!
    What do you think of QSR? Looks solid to me with a juicy yield. What do u think ?

  31. Hi jimmy great content btw, i've learn so much already thanks to you! Quick question 🙂 Is Cisco stock evaluation already in your "pipeline" if not do you think many would like to see it?

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