Introduction

In early September I wrote an article speaking to the fact that The Walt Disney Company (NYSE:DIS) couldn’t seem to get out of its own way when it came to breaking out of its chronic stock slump. Over the past few weeks, Disney has seen a major move towards the $100 threshold after reporting its quarterly results and breaking the all-time worldwide box-office record. This uptick has been buoyed by Doctor Strange, Moana and Rouge One to round out the year at the box office. The stock fell from the $120s in late 2015 to low $90s and had been stuck in the $90 range all throughout 2016. This perpetual slump was almost entirely attributable to the decrease in ESPN subscribers and thus revenue and profit from their Media Networks segment. Excluding ESPN, Disney has been executing well and reporting record numbers throughout its other business segments. Disney has a deep and diversified enough entertainment portfolio to make a compelling case that these ESPN fears are overblown. Disney’s portfolio consists of Marvel Entertainment, Lucasfilm, Pixar, ESPN, ABC, 32% shareholder in Hulu and of course the core Disney franchise (Disney Studios, Disney consumer products, Parks and Resorts and Disney Cruise Line). The revenue stream from these assets is as diverse as the assets themselves. The ESPN franchise within the Media Networks segment generates revenue/operating income that are disproportionate to the amount of the company’s overall revenue and operating profit. Thus, one can see why investors were spooked after two consecutive significant declines in ESPN subscribers and thus numbers over the past three years. The decreases in revenue within this segment have been arrested and on the rebound due to measures put in place at Disney. As this revenue stream slowly recovers with initiatives put in place and investors can rest assure, Disney will likely retrace the $120 level seen in 2015. Continue reading "Disney Pushing New Highs and Breaks All-Time Box Office Record" →