Disney: Is Long-Term Growth A Possibility?

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Integer Investments


  • The company now trades at a near 20% discount to the market.
  • Disney’s shift towards direct-to-consumer distribution could provide huge potential upside.
  • The company's FY18/19 release schedule and strength of Parks and Resorts will have a positive impact on future earnings growth.
  • Here we discuss the qualitative factors that we believe will drive Disney’s growth with specific focus on the Studio Entertainment and Parks and Resorts segments.
  • Our target price is $110.

By Ben Roberts, Integer Investments analyst


Earlier this year, we posted an article focused around the future prospects of The Walt Disney Company (NYSE:NYSE:DIS), coming to the conclusion that despite the weakness of ESPN, we believe that there is a clear path towards value creation. Disney is currently trading at $98.36 and a 2017 P/E ratio of 17.36 (Gurufocus), this is still cheap compared to the rest of the industry, with analysts still overpricing in the downtrend in Disney’s media networks business. Below, we will discuss Disney’s shift towards direct-to-consumer distribution, outlook for the Parks and Resorts and Studio Entertainment segments and updated reasons as to why we are still optimistic about Disney’s prospects moving forward.

Streaming as a major disrupter

The growth of Netflix (NASDAQ: NFLX) at 20% Y/Y has seen the entertainment market make a significant shift towards direct-to-consumer services as companies look at taking on Netflix’s first mover advantage. We have recently seen the launch of CBS All Access, growth of original programming on Hulu, and continuing seasonal strength of HBO GO. The current market shows Netflix holding around a 75% market share, with the smaller players such as Hulu and CBS Access falling far behind.

The competitive advantage is that direct-to-consumer platforms allow the ability to consume entertainment at a time of your choosing, large content libraries at the relative cost of a cinema ticket and ability to ‘binge watch’ television shows. This shift in consumption preferences shows no signs of slowing down as consumers are wanting quick, easy to watch content constantly at their fingertips. The profitability of the subscription-based model has been proven by Netflix and we see the overall multimedia entertainment market moving in this direction. Media conglomerates need to decide whether to continue licensing their content to third parties such as Netflix and Amazon (NASDAQ:

This article was written by

Integer Investments profile picture
At Integer Investments we focus on US and European equities with a value/GARP strategy. Most articles are written by our portfolio manager Cristiano Bellavitis, Ph.D. Articles written by our analysts will be signed at the top. To view the profile of our analysts please visit our website.Cristiano is also an Assistant Professor at the Whitman School of Management, Syracuse University (United States). He earned a Ph.D. from Cass Business School, City University of London. He applies academic rigour to our investment strategy. If you want us to follow certain stocks or if you are interested to learn more about Integer Investments feel free to get in touch.(www.integerinvestments.com)

Disclosure: I am/we are long DIS, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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