Disney: A Stock to Buy and Hold Forever
- By Naman Shukla
Although Disney (DIS) disappointed investors in 2016, the stock has displayed decent performance this year as it is up nearly 6% year to date.
Disney reported its mixed second-quarter results on Tuesday. In the first quarter, the company shared earnings per share of $1.50, beating the analyst's estimate by 9 cents. The House of Mouse though missed revenue estimates once again as its revenue came in at $13.34 billion, $110 million less than the estimates. That figure, however, signifies a surge of nearly 3% year over year.
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The intrinsic value of DIS
The primary reason behind the revenue miss is the ongoing concerns around its ESPN platform. The revenue generated from Media Networks segment escalated 3 percent, but its operating income declined 3.5% year over year to $2.22 billion. The decrease in operating income was due to higher programming costs as well as shrinking subscriber base.
As a matter of fact, TV viewing is changing at a rapid pace as younger viewers nowadays are moving away from pay TV for streaming services such as Netflix (NFLX), Hulu. The entertainment giant, however, is making several smart moves that will certainly help its ESPN platform to grow well in the coming years.
In 2016, Disney purchased a 33% stake in BAMTech, a video streaming leader. Furthermore, the company has also integrated its ESPN content on various streaming platforms like PlayStation Vue, Sling Tv.
On the other hand, the House of Mouse's Theme Parks and Resorts business continues performing well as the revenue generated from this segment surged nearly 10% year over year. Moreover, operating income from Parks and Resorts segment also rose 20%, driven primarily by increases at its latest Shanghai Disney Resort, and strength in domestic parks and resorts.
Moving onwards, the revenue generated from studio entertainment segment declined somewhat 1.5%, but its operating income surged a whopping 21% which looks pretty amazing. That impressive growth was mainly due to home entertainment and subscription video on demand (SVOD) results.
Moreover, the studio business was also bolstered by the blockbuster movie "Beauty and the Beast." Also, Disney's latest movie "Guardians of the Galaxy vol 2" performed much better than the expectation. The House of Mouse has released just two movies until now this year but is on its way to release several other hot titles such as "Pirates of the Carribean: Salazar's Revenge" in the second half of this year.