Disney: Cheapest in 20 Years - Barron's

Barron's says Disney (DIS) stock as cheap as it's been in the last 20 years. While not immune to a U.S. economic downturn, investors and analysts have overcompensated for the company's cyclical exposure: Only 22% of Disney's revenue is from reception-vulnerable advertising. Theme parks, which contribute another 30%, continue to see solid booking trends, with an 89% occupancy rate last quarter.

Trading at 14.4 times next years' earnings, shares are at their lowest point in 18 years. The multiple is about equal with that of the S&P 500 average, which sounds ok until you realize Disney normally trades at an average 30% premium. Even better, CEO Robert Iger has succeeded in building a Disney "more diversified, better- managed, less cyclical and more disciplined in its brand development and capital-allocation strategies" than the company Walt built. Iger's 'franchise'-centric philosophy has executives focused on developing brand franchises, such as the exceptionally successful Hannah Montana, whose secondary products become revenue producers for other Disney units.

Morgan Stanley's Benjamin Swinburne gives the company a sum-of-parts value of $43/share ($32.57), which he equates to a $36 stock price after applying a 15% conglomerate discount.

Comments

[Esol Esek:]

That's all very well and good, except that many despise Disney's identity and product, as well as their interference into news organizations at ABC. Beyond that, Disney stands for mediocrity at the movies, where it used to stand for excellence. Its a dinosaur bureaucracy based on the ancient vision of Walt Disney. Eisner was
a property manager with a nasty right-wing streak, not a creator. A creative company needs a creator at the helm, not a suit who bows to a board and shareholders, who would see much better returns with a more vibrant, risk-taking company that spent less time toadying to religious conservatives. The bent of the USA will change dramatically soon, and Disney better face a major cultural opening, because most creative people look on it as a tired joke. Pirates was a great example of a great idea ruined by bureaucratic property management trumping competent direction by someone with creative vision.

2008 Feb 24 03:21 PM

[Tom B:]

Iger's smarter than Eisner. That's why Steve Jobs got Eisner fired. Disney now owns Pixar, which should energize their franchise.

2008 Feb 24 04:12 PM

[marketwatchr:]

With any decent market move up DIS gets to 36 as mentioned in the artical. Eisners ego was damaging to DIS, thus his costly removal. Iger has had some good ideas, and so far has executed them very well, in very diffucult market times. Iger has served the owners of the company, the shareholders well! I believe Disney is, and has been, one of the top five well known and respected company brand names.

2008 Feb 24 04:20 PM

[BuyandHolder:]

Iger has all of the company's different business units working together as a team. A far cry from the internecine turf battles waged and mostly encouraged under Eisner's regime. As for creative excellence, look only as far as Pixar, one of the most creative, innovative movie studios in history. There is an impressive "platform agnostic" philosophy towards the leveraging of a variety of content, whether it's Pirates, High School Musical, Hannah Montana, EPSN or ABC TV. Disney brings its content to consumers on air, online, DVD, video games, live theatre, consumer products, books. I'm long in DIS and feeling pretty good about it these days.

2008 Feb 24 07:05 PM

[K. Lewis:]

The strong creative vision at Disney comes from the head of animation. John Lasseter.

2008 Mar 09 11:57 PM