310 Presentation Essay

Current Situation

First, I’d like to talk about the current situation of Walt Disney’s stock. As one of the world’s largest international entertainment companies, Disney is considered as a good bargain in the stock market today. And now it’s the right time to buy in.  As an entertainment conglomerate, Disney has various sources of revenue and profit from its five sectors: media networks, studio entertainment, parks and resorts, consumer products, and interactive media. Due to these 5 segments, Disney has been able to manage financial risk for its long-term investors.

This year, Disney’s stock price dropped comparatively lower to its previous performance. This graph here is the stock price change over the past 10 years. As you can see, it went upward and reached to its peak. Recent years, it goes downward a little bit.

More specifically, On July 1, 2016, the stock price was at $98.04, which is lower than it was the same time last year. All these are due to fears of “cord-cutting”; This means that former cable subscribers are switching to streaming services online and investors are worried, since Disney’s revenue comes from its media networks. Major cable networks include ESPN, Disney Channel, and ABC. ESPN will especially incur a sizable loss for Disney’s operating earnings. ESPN lost over 1.5 million subscribers from February to the end of May this year”, approximately 10,400 subscribers every day and 10 million subscribers in the past two and half year. Indeed, an annual revenue loss of $840 million both leaves Disney investors uneasy and rapidly drags the stock price down.

However, the loss is not fatal thanks to diversification. Even if Disney’s media profits sank in the past few years, other segments are able to make up for it. According to Figure 5, the studio entertainment has thrived steadily, becoming the most profitable segment for Fiscal Year 2016 up to now. Current releases such as Star Wars: The Force Awakens have demonstrated this. Another factor that lessens the impact of cord-cutting is, the benefits Disney gains from cord cutting itself. New streaming services have a limited number of channel offerings, and Disney can use ones like ESPN as a channel provider. CEO Bob Iger once asserted that even streaming platforms like Netflix are among Disney’s most profitable customers; despite the cord-cutting, Disney can incur benefits from the opportunity to stream channels on Netflix.

Future Trend

According to NASDAQ, Disney is expecting to have an increase in earnings at an average rate of 9.14% per year and an increase of 12.69% revenue over last year. Many analysts are saying there is a huge upside potential for Disney’s stock thanks to three catalysts:

1. Shanghai Disneyland: A huge potential cash generator for Disney is the launch of Shanghai Disneyland. This $5.5 billion park is distinct from any other Disneyland around the world, with themes from Pirates of the Caribbean and Tim Burton's Alice in Wonderland as main focuses of this park. Due to obvious advantages geographically and population-wise for the resort, analysts predict an inflow of approximately 12 million visitors in 2016. With over 330 million people who live within a three- hour drive from the park, Shanghai Disneyland is expected to add up to $6 billion to Disney’s income statement on an annual basis.
2. The Star Wars franchise: The Star Wars series is an extremely profitable investment for Disney in the long run. According to Hollywood Reporter, the movie Star Wars: The Force Awakens has generated over $1.54 billion worldwide in 2015. Besides revenue from the box office, Star Wars generated more than $700 million in sales. With five more Star Wars movies anticipated, Disney will recover its purchase of Lucasfilm shortly and the films will boost its stock in upcoming years.
3. Key competitors and disruptors of traditional TV: As an entertainment company that has great content, Disney has become an aggressive competitor and disruptor of traditional TV. The studio segment of Disney is able to deliver great shows to audiences directly through cable networks like ESPN. Thus, it’s becoming a great threat to streaming platforms like Netflix. Hulu, which is similar to Netflix, currently has 33% of its stock owned by Disney. This has proven beneficial, as in 2015 it garnered nearly $1.5 billion in revenue.