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Disney: The 'Other' Segments, By The Numbers

Summary

There are concerns over the Media Networks segment's future growth prospects, but the concerns are overblown.

The Studio Entertainment and Parks and Resorts segments will be major players for the company throughout 2016 and 2017.

Disney is a great long-term buy at today's price.

The Walt Disney Company (NYSE:DIS) has been in the news a lot over the past few weeks, and the topics covered have had both a positive and negative impact on the company's stock price. More recently, the news has been shinning a bright light on Disney's future growth prospects.

In early April 2016, it was announced that Mr. Thomas Staggs, chief operating officer, would be stepping down from his role later in 2016. Mr. Staggs was widely viewed as the individual to succeed Mr. Bob Iger, CEO, so the news came as a big surprise. The uncertainty related to Disney's succession plans - Mr. Iger is scheduled to retire in mid-2018 - caused DIS shares to dip to the mid-$96 range in the days following the announcement.

(Source: Nasdaq.com; edited by author)

However, DIS shares are up almost 6% since the Staggs news was first announced, as the sentiment has quickly shifted from negative to positive. Disney recently received encouraging weekend box office news on its latest hit, The Jungle Book, and on the same day, the company also received an upgrade from Pivotal Research (it moved the stock rating from Hold to Buy, and upped the price target from $104 to $121).

Beyond the topics that have recently been covered by the news outlets, there are several factors that are negatively impacting Disney's share price. Increased programming costs and cord-cutting worries are on the top of the list of concerns, and rightfully so, as the Media Networks segment has consistently accounted for a large portion of Disney's total revenue and operating income.

But the other segments have been greatly outperforming both internal and external expectations, and, in my opinion, there are several operating segments that are now in the position to "make up" for the anticipated lost revenue/income if the Media segment concerns come to fruition. For example, Disney's Studio Entertainment segment has been able to produce movie hit after movie hit, and the road ahead still looks very promising (see this article for more information on Disney's fiscal 2016 line-up).

The Concerns Are Overblown - The Media Segment Is Still Important, But The Other Segments Are Becoming More Relevant

There is no denying the significance of the Media segment to Disney's consolidated operating...


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