Disney’s $218 billion in sales isn’t enough for dip buyers

(Bloomberg) – Not even the cheapest valuation since the Covid-19 pandemic is enticing investors to buy Walt Disney Co. shares.

Most Read by Bloomberg

Losses in its online video business and a drop in subscribers to its Disney+ streaming service are just some of the problems the company is facing. Add to that the impact of the Hollywood actors and writers strike and a fees dispute with the second largest US cable company, which has resulted in Disney taking its channels, including ESPN, off service, cutting off access for millions of viewers.

“I don’t want to own it short-term and I don’t know if I want to own it long-term,” said Nancy Tengler, Laffer Tengler’s chief investment officer, of Disney stock. She cites the fee dispute with Charter Communications Inc. as one of her top concerns while calling for the dividend to be reinstated. Your company sold most of its Disney holdings in 2021.

The world’s largest entertainment company is in the midst of a major upheaval and launched a comprehensive cost-cutting offensive following the return of CEO Bob Iger in November. These included cutting 7,000 jobs and other spending cuts.

Read More: Disney Hopes for Share Price Recovery on More Iger: Tech Watch

Disney stock has lost about $218 billion in market value since its $367 billion peak in 2021. The price is trading at an underwhelming 17x of its forecast earnings over the next 12 months. That’s down from a 77-fold peak in late 2020, when rock-bottom interest rates and exuberance at streaming companies drove the stock higher.

By comparison, Netflix Inc. is up 51% this year — the company now trades at about 31 times forward earnings — on the back of improving profitability and a renewed surge in streaming subscribers taking advantage of it company partly traces it back to a procedure against the disclosure of passwords. Disney, whose shares have fallen 6.8% over the same period, is planning a similar move.

The story goes on

The impact of the Hollywood strikes on media companies’ content pipelines is becoming a bigger problem as it progresses. Warner Bros. Discovery Inc. has lowered its full-year adjusted Ebitda guidance on the assumption that the strikes will have a negative impact of up to $500 million. Netflix probably has the largest cushion in the industry, with the largest content library.

“I’ve traditionally been one of those people who would buy Disney here,” said Ross Gerber, co-founder and CEO of asset management firm Gerber Kawasaki Inc. However, the strike has made him “increasingly nervous” about his entertainment and investments.

Disney is also in the process of buying Comcast’s stake in Hulu and selling its television networks, including ABC and FX.

Gerber said he would like the labor dispute to end, Disney+ to achieve profitability and ESPN to be sold. According to Keybanc, the sports network could be worth as much as $30 billion. Wedbush put the potential price tag at more than $50 billion.

“It would be a great move for them to monetize the asset,” Gerber said. “Because obviously, Disney’s dissolution is worth more than Disney combined right now.”

Tech chart of the day

The Nasdaq 100 index is up more than 40% this year, compared to a little over 6% gain for the Russell 2000 index. This outperformance results in a ratio of 8.2, just above the 8.19 seen in the dot-com era.

Top Tech Stories

• China plans to extend a ban on iPhone use in sensitive departments to include state-backed agencies and state-owned companies, a sign of growing challenges for Apple Inc. in its largest overseas market and global manufacturing base.

• SK Hynix Inc. has launched an investigation into the use of its chips in Huawei Technologies Co.’s latest phone after disassembling the device revealed the memory and flash memory inside.

• Online grocery delivery startup Instacart Inc. is preparing to set a price range for its IPO and launch its investor roadshow as early as Monday, people familiar with the matter say.

• Hackers linked to China stole the company account of a Microsoft Corp. engineer. and are suspected of using that access to steal a valuable key that enabled the hacking of top US officials’ email accounts, the company said in a blog post.

The results are due on Thursday

• pre sales

  • Method Electronics

  • John Wiley

• Post Market

  • DocuSign

  • guide wire

  • smartsheet

  • soldering

  • Semtech

– With support from Ryan Vlastelica and Subrat Patnaik.

Most Read by Bloomberg Businessweek

©2023 Bloomberg LP