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 OVERVIEW
The monarch of this magic kingdom is no man but a mouse -- Mickey Mouse. The Walt Disney Company is the #2 media conglomerate in the world, behind Time Warner. Disney owns the ABC television network, 10 broadcast TV stations, and more than 70 radio stations. It also has stakes in several cable channels such as ESPN (80%) and A&E Television Networks (37%). Its Walt Disney Studios produces films through imprints Walt Disney Pictures, Touchstone, Hollywood Pictures, and Miramax. Walt Disney Parks & Resorts, which includes Walt Disney World and Disneyland, owns the most popular resorts in North America. Walt Disney Internet Group oversees the Mouse's Web properties (ABC.com, Disney Online, ESPN.com).
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INVESTMENT THESIS
While DIS’s recent results reflected disappointing film performance, we view as attainable its targeted double-digit earnings growth through at least FY 08.
The FY 06 film slate includes 2005 holiday releases Chicken Little and Chronicles, plus a Pirates of the Caribbean sequel as well as the highly anticipated Disney/Pixar film, Cars, both set for the summer of 2006.
A possible announcement regarding a new distribution deal with Pixar could provide a boost to the shares.
Other near-term catalysts we see include strong ABC ratings, and improved park operating leverage, aided by the ongoing 50th anniversary park celebrations and the recent opening of Hong Kong Disneyland. We also see steady long-term growth at ESPN, after recent long-term renewals of key carriage deals and professional sports rights.
Separately, we think DIS’s balance sheet shows ample financial flexibility for a
possible increase in dividends or stock buybacks, amid increased investments
in newer distribution platforms such as Internet, wireless and video games.
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STOCK PERFORMANCE
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TODAY’S PRICE
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WALT ST INTRINSIC VALUE ESTIMATE
$32
Click Here for DEFINITION of Intrinsic Value.
Not a guarantee of future performance. Important disclosures and definitions of the value estimates, graphs and other presentations are located at the bottom of each web page.
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RELATIVE VALUATION RATIOS
updated once each month (5/03/2006)
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CEOs ON CAMERA
The Walt Disney Company (DIS) CEO-Elect Robert Iger (4:52) 05/12/05 9:40ET - Iger reports on DIS's earnings and business.
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This web site is intended for U.S. persons. This web site should is not a solicitation or offer of services in any jurisdiction that WALT ST Investment Management, Ltd. is not qualified to do business. The contents of this web site is owned by WALT ST Investment Management, Ltd ©2000 Walt Street Investment Management ltd. All rights reserved. The information provided is for informational purposes only and it is recommended that all investors consult their appropriate advisors before investing. All research and commentaries are accurate as of the date of publish and WALT ST Investment Management, Ltd. is not responsible for updating past information that may be included on this site. All opinions are subject to change without notice. This web site is not a secure network and online access may be interrupted. Clients and Investment Advisory Representatives (IARs) are responsible for all hardware, software used to access this site and are also responsible for the confidentiality of passwords. All information posted to this web site is believed to be accurate and reliable however WALT ST Investment Management does not guarantee accuracy or completeness of information. All questions and or comments relating to this web site should be directed to Walt J. Sokira, E-mail: walt@waltst.com, fax 330-677-1951, phone 330-677-1950. Site related problems or questions e-mail: webmaster@cyberjam.com, Web Site Developed by Cyberjam Internet Services
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THE OPTIMIST SAYS . . .
Disney's vast content library will be a source of cash flow for years to come.
Thanks to Desperate Housewives and Lost, two shows created by Disney's TV operations, ABC's ratings have improved significantly and have led to higher broadcasting profits.
ESPN is the worldwide leader in sports, a position that results in huge profits for Disney. We expect continued growth at ESPN for years to come.
Disney is aggressively pursuing new means of distributing its valuable content to the world. With Steve Jobs aboard, we look for this aggressiveness to intensify.
The addition of Pixar could spark a creative renaissance at Disney, enhancing its portfolio of characters and filling its coffers.
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THE PESSIMIST SAYS . . .
Technology and piracy are making the media environment more challenging by the day. Disney will have to be very smart and creative to expand its business in the face of such challenges.
The company's extensive tourism-related assets make it vulnerable to concerns about terrorism.
Disney is giving 12% of itself to Pixar. If the deal does not go as well as planned, Disney shareholders will end up with an even lower return on their investment.
Disney's live-action studio lost hundreds of million of dollars at the end of 2005, demonstrating the hit-or-miss nature of the movie business.
Rising health-care costs have eaten into margins at the theme park business and may cause even more financial headaches.
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