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  • I Was Wrong About Disney  2 comments
    Jun 24, 2014 4:48 PM | about stocks: DIS

    Last month, I wrote an instablog post about how Disney is a long-term sell. Over the last four weeks, I've had a chance to go back over what I wrote, along with some other articles about the future of Disney, and I've realized that my judgment seemed a little too harsh.

    Here are some of the facts:

    · As of May 28, Disney went from the #2 most shorted stock in the Dow to #10.

    · Since my post on May 22, the stock reached a peak of $85.48 before dropping to its current position of $82.68. In total, the 0.67% loss over the month isn't impressive, but it's also not Chicken Little-worthy

    · Despite a lukewarm performance in the last 30 days, both a 8.51% YTD gain and a 32.54% gain from this time last year tells me that it would be reckless to simply wave off what they're doing here.

    · The current P/E ratio of 21.27 is a little higher than their average of 17.4 over the last decade, but again, not Chicken Little-worthy

    The main issue I had was the sustainability of their revenue from studio entertainment and consumer products. Frozen was massive success and they've easily translated it into rides, shows, and games. The one thing I underestimated in all of this is the rationality of consumers.

    For example, some Frozen-related plush toys are selling for hundreds of dollars-and people are buying them. Disney also just upped their theme park prices, and it's not going to stop people from going. Not one bit. In fact, revenue from their parks increased by 8% last quarter in a tough economy. The power they hold simply can't be duplicated.

    The other touchy talking point was that of TV revenue. Disney gets almost half of its overall revenues from its media networks, with ESPN leading the charge, followed by ABC and the Disney channels. While I still think the changing landscape of the television industry is going to make for some trying times, I failed to consider that ESPN has already made moves to compensate for it with its online streaming service ESPN3-showing it shouldn't have too many problems making the transition (Disney also owns 33% of Hulu). The other networks, however, remain a concern.

    In conclusion, Disney has enough in the pipeline right now to continue to be a solid choice, although maybe not as exciting as they have been in the past year. It's also important to recognize that Disney's valuation is different than any other company due to its unique ecosystem. Like I said before, it would be difficult to duplicate what Disney has going for it on so many levels.

    Disclosure: The author has 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 (2)
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  • Cmcleod1124
    , contributor
    Comments (29) | Send Message
     
    Never doubt the power of a child's ability to get his/her mother/father to spoil them.
    24 Jun, 05:46 PM Reply Like
  • Anyoption
    , contributor
    Comments (277) | Send Message
     
    Author’s reply » Sadly true. But it works great for Disney
    28 Jun, 02:33 PM Reply Like
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