Forget Theme Parks, Disney's Strength Is ESPN And Cable

| About: The Walt (DIS)

We recently came across an article on Seeking Alpha that talked about how Disney’s (NYSE:DIS) stock is attractive at current market prices. Do we agree with the conclusion? The answer is yes. But our premise differs from what the author mentions. Unlike other media companies such as News Corp (NASDAQ:NWS), CBS (NYSE:CBS), Viacom (NYSE:VIA) and Time Warner (NYSE:TWX), Disney also maintains large theme parks and resorts. We believe that the author of this article has stressed more on this aspect than what we feel is necessary. Even though the company may be making lot of progress on this front, these aren’t really the businesses that investors should watch.

We estimate that theme parks and resorts business constitute less than 10% to Disney’s stock value.

The reason we believe Disney is attractive is because of continued success of its major cable channels like ESPN and Disney Channel. These channels, especially ESPN, command a high premium and provide stable revenue stream due to high dependence on subscription revenues. In fact we estimate that ESPN is almost 30% of Disney’s value

(Chart created by using Trefis' app)

Our price estimate for Disney stands at $46.39, implying a premium of about 50% to the market.

Disclosure: No positions