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Disney Q1 2019 Results: Strong Potential

Feb. 06, 2019 6:52 PM ETThe Walt Disney Company (DIS)16 Comments


  • Disney repositions for Direct To Consumer service.
  • Very strong financial position with which to pursue its DTC opportunity.
  • I posit that investors are unnecessarily fearful and disenchanted with Disney.
  • Overall, Disney remains meaningfully undervalued.
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Investment Thesis

While Wall Street continues to be passionate and obsessed over Netflix (NFLX), investors are leaving another strong investment opportunity available for patient and contrarian investors.

Disney (NYSE:DIS) is a terrific investment in the space of content providers and distributors. I strongly contend that Disney's shares are undervalued and offer investors a strong opportunity to profit with an upside potential of 35-50%.

Overarching Strategy: Direct To Consumer Offering

The whole story on The Street with regards to Disney continues to be focused on its DTC offering - which is expected to be launched towards the back end of 2019. Despite much chatter, currently, investors remain thoroughly unsure whether Disney will succeed with this new platform.

Thus, despite much attention, ironically, Disney spent its earnings call deflecting as many questions as possible about this new service, with CEO Robert Iger pointing out that more would be disclosed during its investor day in April.

Having said that, a few details did percolate. For instance, during the call, we hear that Disney's control of BAMTech appears to have been a triumph, as BAMTech succeeded in showing strong stability and reliability during peak streaming consumption.

Additionally, echoing Disney's previous earnings call, Iger highlighted that Disney's focus will be less on the volume of content on Disney+ but more closely aligned with new 'skinny' bundle-concept, made up of a fewer but higher-quality Disney shows.

In fact, the platform's focus will be largely on families, which seek a certain type of branded video. And that consumers should only pay for the type of content they ultimately desire. As for other types of consumers, for example, those which are passionate about sports can opt for a different type of package, such as a sporting package, via ESPN+.

Balancing Act For Disney

Next, interestingly, Iger did not shy away

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Analyst’s Disclosure: I am/we are long DISCK. 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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