Hi ,
Do you think Disney stock (DIS) is a good buy currently. For holding it for a long time . Possibly 5-10 years or maybe forever.
My reasons:
1. Very powerful brand. I am 30 years old. I loved Mickey mouse when i was a kid . Kids growing up now also love mickey mouse and other disney characters. The brand is here to stay.
2.The brand is recognized globally . Their cable business is suffering currently . But they may recover out of it soon.
3. Pays Dividends .Although not much. It has scope to grow.
4. Stock is available at 16.5 times earning.
5. It is available at a discount of 25% of its recent high.
I agree that the Disney brand is truly staggering. The classic characters like Mickey and Minnie, Pixar, Star Wars....it just goes on and on. It drives huge profits in movies and television and merchandising, and drives traffic to their theme parks. Those parks are a big part of the brand themselves. In one form or another, Disney will be around for decades, churning out profits from films, merchandise, theme parks, and anything else you can imagine that can have a character slapped onto it.
The reason it's down at current prices is negativity over the cable television business, which was their most profitable area of business last quarter. More and more people are cutting the cord and moving to cheaper streaming options. Disney has some crown jewels in the cable television business with the ESPN networks and their own Disney channels, but right now nobody seems to have a good idea as to how to value that part of the company. Believe it or not, a quick glance at the latest 10-Q shows cable revenues and profits were up 1% year over year last quarter, but I have no clue whether they can keep that performance up and it is obvious many in the market don't have confidence that they can. Cable television represents nearly 30% of their revenues, at $4.2 billion last quarter, nearly as large as their theme parks and resorts business. Cable is also far more profitable at nearly 50% margins.
The dividend itself isn't a reason to buy a stock. Sure, it imposes some discipline on management since they know they are expected to keep up those payments, but investors should be focused on total return, with the dividend one component of that return. The P/E of 16.5 sounds reasonable, but have you dug into the numbers to see if there are any unusual one-off profits or charges that are affecting that number? I haven't really looked at DIS in a couple years. I don't know whether the current price is a steal, fair, or overvalued, and wouldn't know until I did some serious reading. I could then make different estimates on the future of the cable and OTA television business and see how those affect my valuation.
I'm not trying to sway you one way or the other, just raising some points to consider. If you're really in it for the long haul I think Disney has too many valuable assets for it to turn out badly for an investor, but like I said, I haven't really taken a good look at it in a couple years.