Disney: When 'Losing' Is The Right Thing To Do

Jan. 21, 2019 3:16 AM ETThe Walt Disney Company (DIS)35 Comments
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  • Disney is restructuring its business, so management recently released its recasted financial results for the last three fiscal years.
  • The company is losing money in the streaming business, but I view this as a necessary evil.
  • I am long Disney, and I recently added to my position.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

Walt Disney (NYSE:DIS) stock has not performed well lately, the shares have still outperformed the broader market over the last year.

ChartDIS data by YCharts

Investors have been concerned about Disney's future, and rightfully so, as the company tries to position itself in a changing media environment. It was recently reported that Disney is "losing over $1 billion in streaming", which is a topic that the bears are running with. I, however, believe that this company is making necessary investments that will put it in a better position for the years ahead. Simply put, Disney shareholders should ignore the noise and focus on importance of this company getting it right in the streaming space.

When "Losing" Is The Right Thing To Do

Disney is indeed losing money while the company builds out its streaming service, but I believe that these investments are a necessary evil. Consider the following investments:

  • Invested in HULU (owns 30% interest)
  • Invested in Vice Group (owns 21% interest)
  • Invested in BAMTech (owns 75% of the company)
  • Launched ESPN+ in early 2018
  • Investing in the upcoming launch of Disney+, which is expected to be rolled out in late 2019

In my mind, these investments are the future for Disney, as I believe that a material portion of the business will eventually revolve around the company distributing its own content. With this, Disney is making changes to how it reports results to better capture how the business will be managed/run in the future. The company is combining its international media business and streaming operations into one unit, and creating a new operating unit for consumer products and Parks & Resorts. It will have the following operating units:

  1. Media Networks
  2. Parks, Experiences & Consumer Products
  3. Studio Entertainment
  4. Direct-to-Consumer & International ("DTCI")

Makes sense, right? Mr. Bob Iger, CEO, is

This article was written by

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long DIS. 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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