Stock of the week - Walt Disney
10.10.2023
Who doesn’t know Mickey Mouse? The beloved Walt Disney figure is well-known among generation. The Walt Disney Co. engages in the business of international family entertainment and media enterprise. It owns and operates television and radio production, distribution and broadcasting stations, direct-to-consumer services, amusement parks, and hotels. It operates through the following business segments: Disney Entertainment, ESPN, and Disney Parks, Experiences, and Products. The company was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA.
The company has been underperforming the equity market since years, with an year-to-date performance of ca -2%, while the broad S&P 500 Index is up almost 14%. Over the past 3 years, the stock lost more than 30%. For this period, S&P 500 gained around 25%.
Disney’s shares reached all-time high early 2021 trading close to 200 USD per share, after several quarters of strong growth in sign-ups to its flagship Disney+ streaming service. Since then, the stock price has been dropping: Disney has lately been struggling with Hollywood strikes that froze television and film production, a high-profile battle over fees with large cable operator Charter Communications and the prospect of sustained losses in its TV and streaming businesses. Currently, the stock trades around USD 85.
What rises hopes that the company may achieve a strategic turnaround, is activist investor Nelson Peltz’ recent increase of the stake of his Trian Fund Management in the company. The fund is expected to request is expected to request multiple seats—including one for Peltz. Peltz launched a run for a seat on Disney’s board earlier this year after the company rejected his request to become a director. According to Trian Disney is significantly undervalued and is urgently in need of a more focused and value driven board of directors. Trian has built up its stake in recent months to more than 30 million shares, from the roughly 6.4 million shares it held at the end of the second quarter.
Peltz’ backs the CEO Bob Iger, who regained the role last year after having held the position for 15 years from 2005 until 2020. Iger is focusing on increasing the profitability of the streaming business through a series of price increases and cost-cutting measures. $5.5 billion in budget cuts and reduction of 7,000 jobs are currently progressing quickly.
And here is how the bank analysts currently assess the stock:
The consensus of the bank analysts is "buy". Out of 33 analysts covering the share, 24 rate the stock with "Buy", 7 with "Hold" and 2 analysts recommend to sell the stock.
The average expected upside of stock price for the next six to twelve months is currently ca 23% (closing price on 10/10/2023)
Sources:
1. The Walt Disney Company | US2546871060 | 984192 | UMushroom
3. Why Nelson Peltz Grew Impatient With Disney’s Turnaround Efforts - WSJ
4. Nelson Peltz Boosts Disney Stake, Seeks Board Seats - WSJ
