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  • Disney A Long-Term Sell 7 comments
    May 22, 2014 7:23 PM | about stocks: DIS

    Disney's most recent quarter was pretty solid. They made headlines with a pretty notable acquisition of the YouTube producer Maker Studios; with Frozen, they broke their own record with the highest-grossing animated movie of all time, beating Toy Story 3 by over $150 million (they'll be able to keep riding that gravy train for quite a while, I'm sure); and they also saw considerable success with the continuation of their Marvel comics series with Thor: The Dark World.

    It was exciting, really. But it's not enough. Here's a look at the year over year change for Disney.

     

    Quarter Ended

     

    Revenues

    3/29/2014

    3/30/2013

    Change

    Media Networks

    5,134

    4,957

    4%

    Parks and Resorts

    3,562

    3,302

    8%

    Studio Entertainment

    1,800

    1,338

    35%

    Consumer Products

    885

    763

    16%

    Interactive

    268

    194

    38%

     

    11,649

    10,554

    10%

    As you can see, their largest increase in terms of dollars is revenue from their Studios Entertainment. And although we're looking at more and more Marvel movies, and even the new Star Wars trilogy, there's no telling how those will end up being received. It's definitely impossible to assume they have the wherewithal to produce enough Frozen-esque movies to keep those revenues from going back down. In all reality, that's where they're going.

    The increase in consumer products, essentially the merchandising from these movies, also isn't sustainable as we saw it over the past quarter.

    The biggest fear for investors, however, is where Disney receives the largest chunk of its revenue pie-television. With the rise of "cord cutting" and paid streaming networks like Netflix, Hulu Plus and Amazon Prime, who knows how that's going to threaten Disney's revenues through its networks ABC, ESPN, and the Disney channels?

    All in all, I'm not very confident in Disney stock's sustainability moving forward. With the future of television in a massive transformation and the high volatility of its studio and consumer products revenue, the stock is looking more and more overpriced by the day.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: DIS
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Comments (7)
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  • deercreekvols
    , contributor
    Comments (9746) | Send Message
     
    I could not disagree more with your thesis.

     

    I have held (DIS) for years and won't sell unless there are serious issues that would affect stock long-term. This is one that will get passed on to my children.

     

    The talk of ESPN getting challenged from other networks is laughable.

     

    (DIS) will continue to grow and stock will continue gains.

     

    Just my opinions, of course. Time will tell.
    22 May 2014, 09:12 PM Reply Like
  • Anyoption
    , contributor
    Comments (1367) | Send Message
     
    Author’s reply » I didn't say ESPN is getting challenged from other networks. I said that the television industry is being changed entirely, and that's not laughable. ESPN will always be strong, but there will come a time when people no longer want to pay over $100/mo. for a cable bundle just to keep it. Cable company growth is slowing and it will only be a matter of time before they have to change things up to survive, and you can't think Disney won't get caught up in that when that's their biggest revenue source.
    23 May 2014, 10:16 AM Reply Like
  • redarrow5150
    , contributor
    Comments (1376) | Send Message
     
    Which means a model to pay directly to the likes of ESPN, FOX or CBS via the internet is looking more and more likely and even more profitable.
    23 May 2014, 08:00 PM Reply Like
  • Anyoption
    , contributor
    Comments (1367) | Send Message
     
    Author’s reply » That may be, but the transition certainly won't be seamless. And while ESPN is arguably one of the only networks the likes of Netflix and Amazon Prime can't compete with, they're not Disney's only network.
    24 May 2014, 10:53 AM Reply Like
  • redarrow5150
    , contributor
    Comments (1376) | Send Message
     
    Yes but content is King...and who has more content than Disney?
    24 May 2014, 01:44 PM Reply Like
  • Anyoption
    , contributor
    Comments (1367) | Send Message
     
    Author’s reply » I'l give you that. But it's all about growth, and 4% over the last year isn't enough for me to be confident as things start to get shaken up. That being said, I heard they just jacked up their prices at Disneyland again, so that should soften the blow a little.
    25 May 2014, 02:34 PM Reply Like
  • redarrow5150
    , contributor
    Comments (1376) | Send Message
     
    Growth in what way? Compared to the rest of economy? Also they will have no where the capital expenditures that they've had over the last five years in building Carsland and Fantasyland. They are using that improve cash flow for share repurchases and more than likely continue to raise it's dividend.
    25 May 2014, 04:48 PM Reply Like
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