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Krause Fund Research Fall 2019
Walt Disney Co. (NYSE: DIS) Communications-Media
Jake Grovert Colin Heimbach [email protected] [email protected]
We recommend a buy rating for Walt Disney Co. because innovative and forward thinking has aided Disney to mitigate the risk of consumers “cutting the cord,” which is the biggest risk facing their current business model. On top of this they have positioned themselves favorably to become a key player in the now popular streaming service industry.
Drivers of Thesis:
Recently launched streaming services in the Consumer Products & Interactive Media segment resulting in estimates for revenue within the segment to increase 55% during fiscal year 2020.
Competitive advantage against rivals in the streaming industry due to not having to spend large amounts on future original content.
Recent acquisition of 21st Century Fox gave Disney a historic market share in the Studio Entertainment industry to help continue growth going forward. This also boosts their streaming service portfolio as they were able to acquire full operational control of Hulu.
Risks to Thesis: Consumer trends of cutting the cord. This results in estimates for
decaying revenue in the Media Networks segment, which is currently Disney’s highest producing segment of revenue.
Estimates for economy to possibly go into a recession due to a slowdown in Real GDP and decreased consumer confidence. This results in less spending on discretionary items, which make up the majority of Disney’s products and services.
12 Month Performance
Investment Thesis
Target Price Range: $162-$178 DCF & EP Model: $170 Relative Value Model: $120
Analysts
Stock Performance Highlights
Current Price: $144.67 52wk Range: $100.35- $150.63 Beta Value: .879
Share Highlights
Market Cap (B) 246.81 Shares Outstanding (B) 1.80 Forward P/E 23.5x EPS (2020E) $5.98
Company Description
Founded in 1923, Walt Disney Co. (DIS) is a worldwide entertainment conglomerate which operates through its four main segments Media Networks, Parks & Resorts, Studio Entertainment, and Consumer Products & Interactive Media.
Company Performance:
ROA 6% ROE 12% Gross Profit Margin 1.57 Payout Ratio 26%
November 15, 2019 Stock Rating: BUY
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We believe Walt Disney, Co. (NYSE: DIS) presents a BUY rating for the University of Iowa Krause Fund Portfolio. In a world where consumers are “cutting the cord” Disney has been innovative and forward thinking. Disney recently made a large splash in the up and coming streaming service industry with the highly anticipated release of Disney+. Upon release they saw over 10 million subscribers sign up in just 24 hours. This immediately made them a top player in the industry and further maintained their stake as one of the largest and most powerful companies in the Communications Services sector. On top of this, we anticipate continued growth of Disney’s Parks & Resorts and Studio Entertainment segments, which is discussed in detail throughout the report. In addition, our DCF and EP model produces an intrinsic value for Disney as of November 15, 2019 of $170 indicating the stock is currently undervalued.
U.S Real Gross Domestic Product (GDP)
Real Gross Domestic Product (GDP) is the market value of goods and services produced by a country in a specific period. It evaluates the health of the economy through 4 main components, consumer spending, government spending, industry spending, and net exports. The federal reserve uses Real GDP to adjust monetary policy in order to maintain the health of the economy. Over the last 3 Federal Open Markets Committee meetings, they have decided to cut the Federal Funds Rate by 25 basis points (bps) each meeting. This moved rates from a 2.25%- 2.5% range to 2.0%-2.25% range in July 2019. The September meeting saw rates cut again to a range of 1.75%-2.0% and the October meeting followed with a cut to a range of 1.50%-1.75%.9 This cut is significant as it allows banks to lend money at a lower interest rate allowing firms and consumers to obtain more capital to invest in projects and spending to grow the economy. In the next 6 months we estimate U.S. Real GDP growth will increase to 2.25% with current monetary policy mitigating some of the external threats to the U.S. economy (ongoing trade war with China and Global weakness in manufacturing).
(Figure 1: BEA.gov Data)1
Consumer spending makes up nearly 70% of U.S. Real GDP.2 The communications sector is directly impacted by this component as it is largely made up of discretionary goods. Therefore, we predict the short-term increase in Real GDP will show a favorable increase to Disney’s profits as their parks, streaming service, and entertainment segments all will be impacted by increased consumer spending on discretionary goods.
The U.S. has seen a 10-year bull run, which we see coming to an end within the next 3 years. Because of this, in the long run, we see U.S. Real GDP falling to a rate of 1.75% growth. With a lower increase in Real GDP growth, consumers will have less disposable income to spend on discretionary goods. Disney will see an impact because of this and may have to begin to decrease prices to keep steady demand.
U.S. Consumer Confidence Index
The Consumer Confidence Index (CCI) surveys consumer attitudes and buying intentions to give insight into current and future economic conditions. The most recent survey at the end of October showed a slight decline from 126.3 to 125.9. This was the third consecutive month that the index declined as in August the CCI dropped from 135.8 to 134.2 and in September it dropped considerably from 134.2 to 126.3.3 This decline shows that consumers are less optimistic about business conditions going forward.
(Figure 3: CEIC Data)3
Much of the economic strength that we have seen in recent years has relied heavily on consumer spending and the on-going trade war with China. Barring any changes in the status of the trade war or other political factors, we estimate that over the upcoming 6 months there will be a continuation of the decrease in CCI at a slow rate. Six months from now we anticipate the CCI to be approximately 120. Three years from now we project a continued decline of the index towards 105.5 as we see key global indicators from other countries point towards this slowdown. This lower CCI over time will affect the Communications sector as many of the firms produce goods that can easily be substituted for cheaper options in a recessionary period. This number is directly related to real GDP and as the economy begins to slow down,
Executive Summary
Economic Analysis
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consumers are less likely to be as confident in the economy and less willing to spend their money on unnecessary goods and services. This directly affects Disney as consumers are likely to spend less on vacations, entertainment, and streaming services.
U.S. Unemployment Rate
The US unemployment rate is a key indicator of the labor market because families with unemployed workers have lower income and the economy begins to slow as people have less money to spend. In October of 2009, the unemployment rate reached a record high at 10%. Since then the rate has been declining and is near record lows. This past September the US unemployment rate was measured at 3.5%, which was the lowest rate in the last 50 years.8
(Figure 4: Bureau of Labor Stats Data)4
The most recent unemployment data from October 2019 has the unemployment rate sitting slightly above the 50-year low at 3.6%.4 Over the next 6 months we are projecting US unemployment to remain low but continue increasing minimally to around 3.9%. Going forward 3 years we believe the US unemployment rate will keep increasing to approximately 4.5%. The low unemployment rates will continue to be a positive factor for Disney and the communication sector as a whole because a higher proportion of employed people in the labor force with a steady income will make more purchases of discretionary items such as a bundled streaming service ($12.99) rather than a single platform one ($6.99), or taking an expensive vacation to one of Disney’s many theme parks or hotels.
Inflation Inflation is the rate at which the general level of prices for goods and services is rising while the
purchasing power of currency is falling.5 Inflation is commonly measured using the Consumer Price Index (CPI). Over the past 3 years, from 2016 to 2019, we have seen a decrease in this measure of inflation (2.1% down to 1.7%). The decline in year over year inflation is good for Disney as it gives consumers higher confidence in the economy and encourages investment. Low inflation also makes it easier for Disney to predict future expenses such as wages and product costs. As we predict that the Federal Reserve will slowly begin to increase the Federal Funds rate, we will see inflation begin to rise. We estimate that this will push inflation back up to where it normally stands at 2%.
(Figure 6: Bloomberg CPI Data)6
Overall Capital Markets Outlook In the short term we anticipate positive market conditions for the communications sector. This is based off of our 6 month estimates of 2.25% real GDP growth, continuation of near record low unemployment numbers, and low inflation. Each of these factors have a positive influence on the sector as they result in more disposable income, which results in higher consumer spending. The majority of the products offered by Disney are considered to be discretionary goods. Therefore, in the short term we see a positive outlook for Disney. Our longer term, 3-year estimates of a decline in Real GDP to a growth rate around 1.75% are due to the end of a bull run, the Federal Reserve raising interest rates in order to increase inflation, consumer’s thoughts on the economy, and heading towards a potential recession. These factors will decrease the amount of money consumers are willing to spend as they instead turn their focus to saving their income. As a result, we believe there will be a decrease in discretionary spending, which in turn will create an unfavorable outlook for the communications sector as a whole. This will present challenges for Disney as the majority of their revenue streams come from consumers who feel that they currently have extra income in their pockets.
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Business Segments and Products With an annual fiscal year end of September 30th, Disney operates through the following four main segments: Media Networks, Parks & Resorts, Studio Entertainment, and Consumer Products & Interactive Media. A breakdown of revenue by segment for fiscal year 2019 can be seen in the below chart.
(Figure 6: 2019 10q)32
Media Networks The Media Networks segment currently makes up the largest portion of Disney’s total revenue at 39.18%. This segment consists of cable networks, television production and distribution operations, domestic television stations, and radio networks. Disney owns three main cable networks ESPN, Disney, and Freeform. The Disney network is the largest of the three and operates over 100 Disney branded television channels in 164 countries that are aimed primarily towards youth viewers. ESPN is the second largest and operates 8 different 24-hour television sports channels in 61 countries. Disney owns 80% of ESPN with the other 20% being owned by Hearst Corporation. Freeform is a solely domestic TV channel of its own, which acquires programming from third parties as well as airs content from within Disney’s own theatrical film library. The majority of revenue from Disney’s cable networks can be attributed to the following 4 TV channels:
(Figure 7: 2018 10k)23
This segment of Disney also operates a broadcasting business through ABC television network, which has affiliation deals with 244 local domestic television stations and reaches nearly 100% of homes in the United States. Additionally, they own 8 local ABC television stations of their own. These include stations in New York City, Los Angeles, Chicago, and Philadelphia. These cities combine to make up the top four nationally ranked TV markets.23 Revenue from the Media Networks segment can be attributed primarily to three main areas. The first is revenue from fees charged to TV providers for the right to deliver Disney’s programs to their customers. The second revenue stream is attributed to ad-sales from commercials that air during their shows. The third is from TV Streaming Video on Demand distribution licensing (TV/SVOD). As consumers cut the cord, this is the only area of the Media Networks segment that is seeing growth as services such as Sling TV and YouTube TV are paying Disney for the right to offer Disney owned channels in their TV/SVOD packages. Interactive Media & Consumer Product The Consumer Products sub-area of this segment licenses Disney’s trade names, characters and literary properties to several manufacturers, publishers and retailers worldwide, as well as, distributes branded merchandise directly through retail, online and wholesale businesses. This segment also develops and publishes games for mobile platforms, books, and magazines. Revenues in this area are heavily seasonal and as a result Disney annually sees large revenue spikes in the fourth and first quarters due to the holiday season. The Interactive Media sub-area focuses on digital distribution to internet-connected devices with the goal of giving consumers the content they want with more choices and ways of personalization. This sub-area is home to Disney’s three streaming services, Hulu, ESPN+, and Disney+. In the most recent earnings call on November 11th, 2019, CEO Robert Iger, said Disney+ launched with more than 500 movies and 7,000 episodes of TV shows.
Company Analysis
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Mr. Iger expects Disney+ to release 60 original series, movies, and specials per year over the next 5 years.18 With the recent 21st Century Fox acquisition Disney acquired an additional 30% of Hulu and now owns 90% and has full operational control of the streaming service. Disney also recently announced that all FX shows will stream exclusively on Hulu and Hulu customers will have access to these shows the day after they air on the FX cable network. Disney also launched ESPN+ in 2018. ESPN+ allows users to watch live sporting events, on-demand shows, and exclusive stories. It is separate from Disney’s ESPN cable networks as consumers still need a TV subscription to view these channels.24 Disney has strategically priced their streaming products individually as well as in a bundle with all three (Disney+, Hulu, ESPN+) to drive its subscriber growth in the early stages by offering lower prices than key competitors. This also allows Disney to be able to increase prices in the future to more closely align with competitors, without hindering its subscriber count and growth. The chart below provides a look into how Disney’s pricing compares to their peers.
(Figure 8: Bloomberg Terminal)6
Studio Entertainment The Studio Entertainment segment is broken down into the following three sub-areas: Theatrical Distribution, Home Entertainment, and TV/SVOD Distribution. The Theatrical Distribution area produces and buys motion pictures, video content, musical recordings and live stage plays. In the theatrical market Disney has acquired well-known and established entertainment companies over the years including Pixar (2006), Marvel (2009), Lucasfilms (2012), and most recently Twentieth Century Fox (2019). The theatrical distribution revenues fluctuate due to timing and performance of releases as well as depending on public tastes and preferences.23
In the Home Entertainment area, Disney sells and distributes physical DVDs and Blu-rays of theatrical productions to consumers within 3-6 months after their release in theaters. Revenue in this area has decreased by 25% over the last 4 years due to the trend of consumers no longer purchasing physical copies of DVDs and Blu-rays. Streaming Video on Demand (SVOD) Distribution is when Disney licenses their theatrical films to video on demand providers for electronic delivery to customers for a specific rental period. This area has seen a growth rate over the last 4 years of 5.8%. However, as we move forward this growth is expected to diminish and likely turn negative as Disney plans to have all their titles available on their Disney+ streaming service. Parks & Resorts Segment The Parks & Resorts segment is the second most profitable segment for Disney making up 30.36% of Disney’s total sales in 2019. This segment includes the 12 theme parks and 52 resorts that Disney owns across the world, as well as, their cruise line business. Major producers of revenue for this segment come from theme park admission, in-park food & beverage sales, retail sales of branded merchandise, vacations at Disney owned hotels/resorts, and merchandise sales/royalties. In recent years, Disney has seen higher growth at their international parks. From 2016 to 2018 they saw a 13.66% growth in total visitors from 80.6 to 91 million annual visitors. The domestics parks had a growth of only 5.7% during those three years as total domestic visitors increased from 94.5 to 99.9 annually. Over the last three years Disney has seen a 7.3% increase in average revenue per domestic guest and 32.5% increase per international guest. In 2018 the average revenue per domestic guest was $161.68 and the average revenue per international guest was $44.11. The low average revenue for international guests is skewed due to Disney only having partial ownership in most of the international parks. Disney owns 47% portion of Hong Kong Disneyland, and 57% of Shanghai Disney. The Paris Disneyland they just recently acquired full ownership of in 2017 and the Tokyo Disneyland they only receive royalties from.
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M&A Activity Over Disney’s lifespan they have experienced a multitude of acquisitions. Some key acquisitions they have made include the following:
ESPN, ABC, and Capital Cities in 1995 for $19 billion,
Freeform in 2001 for $2.1 Billion Pixar in 2006 for $7.4 Billion Marvel in 2009 for $4 Billion Lucasfilms in 2012 for $4.06 Billion BamTech in 2017 for $2.58 Billion 21st Century Fox in 2019 for $74.1 Billion.21
These acquisitions have assisted Disney into becoming the massive media conglomerate that it is today. The recent 21st Century Fox (21CF) acquisition will continue to support Disney’s growth going forward, especially in their Studio Entertainment and Consumer Products & Interactive Media segments. Switch in Corporate Strategy We believe that Disney is in the midst of a transition from primarily being focused on Media Networks, which currently is their largest segment, towards focusing more on Interactive Media. This can be seen through the high M&A spending to acquire BamTech and 21CF. We believe this can be attributed to the trend of consumers “cutting the cord” in favor of streaming services. It appears that the planning process for this has been in the works for some time. The 2017 acquisition of BamTech, allowed for Disney to build the platform used to create ESPN+ and Disney+. Competition Since Disney has so many different streams of revenue, we have found that the best way to look at their competition is by taking a look at who their competitors are in each segment. Media Networks Competition: For Media Networks, Disney’s competition includes the four other major television firms of CBS Corporation (CBS), NBC (CMCSA), Viacom (VIAB) and Discovery Inc. (DISCA). Competition has been tight for this segment due to high M&A activity that has taken place in recent years as companies have raced to build the strongest portfolio of networks. Reasoning for the high M&A activity in this area is due to a need for scale, acquisition of new content and diversification.12 One way in which Disney has been able to differentiate from its peers is that in early 2019 they were able to outbid Comcast and close on the major acquisition of 21CF, which was previously a top competitor of theirs in this segment as well as their
Studio Entertainment segment.11 As the Media Networks segment continues to decay due to more and more people cutting the cord, this acquisition also allows for Disney to strategically build offerings for their streaming services. Parks and Resorts Competition For Disney’s Parks and Resorts segment the major competition comes from other domestic theme parks owned by Six Flags Entertainment (SIX), Cedar Fair (FUN), and Comcast (CMCSA) who owns Universal Studios. Disney is a clear cut leader in this area, but Universal Studios has made a large push with their recent opening of Harry Potter World.11 However, as you can see in the graph below, which shows park admissions for 2018, Disney clearly is still far ahead of its competition as 6 of the top 8 theme parks are owned by Disney.
(Figure 9: Statista: Theme Park Attendance)13
Studio Entertainment Competition Competitors to Disney’s Studio Entertainment segment would include Time Warner, NBC-Universal, Columbia Pictures, and Paramount Pictures. Disney is able to differentiate themselves in this segment with the large portfolio of film companies they have acquired. These acquisitions include the studios of Pixar, Marvel, Lucasfilm and the recent addition of Twentieth Century Fox. In 2018 Disney had the largest share of the film industry with a market share of 26%. Twentieth Century Fox had the 5th highest market share with 9.01%. The 2019 acquisitions combined the two to give Walt Disney Pictures over a 35% market share, which is a historic amount for the film industry.17 Interactive Media Competition: The main competition for the Consumer Products & Interactive Media segment comes from other companies with streaming services. The top competitor in this area is Netflix as they are solely a streaming service and were the first mover in this business. Other competition comes from Amazon Prime Video, CBS All Access, HBO Now, and Apple TV+ which just launched November 1st. This area is extremely competitive right now as many households turn to monthly-paid streaming options after cutting the cord. Due to cutting the cord, many large companies in the sector are rushing into the creation of their own streaming
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services. For example, NBC-Universal is set to release a streaming service of their own called Peacock in April of 2020 and HBO is set to release a second streaming service, HBO Max, in May of 2020 .14 Disney has differentiated themselves with their streaming services as they are able to create the bundle package of Disney+, Hulu, and ESPN+ for $12.99 per month. An effective way to compare streaming services is by their subscriber count. Netflix currently has the largest subscriber count at ~61 million domestic users and ~80 million international users.
(Figure 10: Statista User Count)
Far behind Netflix stands Hulu, owned by Disney, at 28 million users. However, on November 12th Disney+ was able make a huge splash in this market by signing up over 10 million domestic users within just 24 hours of their launch. While this is an enormous amount of initial sign ups, we will not know more about how this number grows until the end of Q1 2020 as Disney has said they will only release this information with their quarterly earnings reports going forward. Disney+ plans to roll out their international streaming service in the first quarter of 2020, which is projected to also have great demand due to the worldwide presence of their brand. It was recently announced in Disney’s quarter 4 earnings call that Verizon Wireless will offer a free year subscription of Disney+ to all their customers who have an unlimited plan. This will help Disney to grow their subscriber base as Verizon has around 20 million customers with plans eligible for a free year of Disney+ on Verizon. Netflix has previously had a comparable deal with T-Mobile where they saw about a 50% participation rate from eligible T-Mobile customers.18 While they are new to the streaming service business, we believe that Disney is in a position for success. Evidence of this can be seen through the extremely high initial demand of 10 million people signing up in the first 24 hours. Also, since the majority of their content will come
from what has already been created in other segments of the company, they will be able to partially avoid the extremely high cost of new content creation that is currently eating away at the margins of their competitors. SWOT Analysis Strengths A leading brand valuation consulting firm out of London named Disney the most powerful brand in the world27. Walt Disney Co. is a brand that is family focused and is one of the most easily recognizable in the world. A brand is one of the most powerful assets to a company. In the case of Disney, consumers know, based off of their brand, they are getting a product or experience that will be of the best quality. Disney has a growing portfolio of popular products and services fueling their business segments. Their continued investments and acquisitions throughout the years allows them to compete and continually grow each of their business segments. Weakness: Disney has limited diversification based on their aim for synergy within their business segments. Since their segments are mostly all connected together, if one theme does not fit public preference then multiple revenue segments are at risk. For example, Star Wars has theatrical films, theme parks, and consumer products. Therefore, if the next Star Wars film flops, then they will not only lose out on their studio entertainment segment, but also their parks, resorts and consumer product segments. Opportunities: As internet -connectedness grows worldwide, opportunity for Disney is to grow in developing markets. They are beginning to do this by releasing Disney+ internationally in Q1 2020, but it will be important for them to continue to invest heavily into his developing markets as it can yield a higher subscriber base resulting in higher revenue in the future. Threats: Disney’s biggest threat is competition from the other large media companies who are also currently trying to get into the streaming market. Also, they face competition from firms creating movies intended to compete with Marvel, such as Time Warner’s DC Universe Superhero movies. Disney also faces the threat of digital content privacy compressing margins by affecting potential revenue. This will become more impactful to Disney when they release their streaming service internationally because other countries may have weaker legal protection25.
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In 2018, the Global Industry Classification Standard (GICS) reclassified it’s sectors by changing the Telecommunications sector into the Communications Services sector. When this new sector was created it added large firms such as Walt Disney Co., Facebook, Alphabet, and Netflix from the Consumer Discretionary and IT sectors and combined them with the telecommunication firms. The Communication Services sector is comprised of two industries, Telecommunication Services and Media & Entertainment. Disney is classified as being under the Media & Entertainment industry. Within Media & Entertainment, there are sub-industries which include Advertising. Broadcasting, Cable & Satellite, Publishing, Movies & Entertainment, Interactive Home Entertainment, and Interactive Media & Services. Within these sub-industries Disney is classified under the Movies & Entertainment segment. The change in the classification creates a way for media and entertainment companies, such as Disney, to be compared more distinctly as they are no longer in such a broad sector. The chart below shows how Disney (in orange) compares to the communication sector (in blue) in terms of % change in share price over the last 3 years.
(Figure 11: Net Advantage)12
Disney had traded similarly to the sector until recently as it has began to see far higher growth. As consumers begin to cut the cord Disney has been able to innovatively shift its entertainment business to stay ahead of the trend by developing a direct to consumer streaming service platform. This platform was made possible through their 2017 acquisition of BamTech, who had previously created streaming platforms for the MLB, NHL and HBO. Disney’s innovative and forward thinking allows them to consistently compete with other large media firms in the communication sector. Recent Development and Trends Compressing Margins Netflix, who has always been the leader of the streaming industry is facing considerable pressure due to other large companies penetrating the market. Disney has announced
that with their own streaming service up and running, they will pull all of their content from Netflix. This will take place at the conclusion of their current licensing agreements. Other companies such as Comcast, who is developing a streaming service of their own, may still license their content to Netflix, but will likely do so at a higher cost. As a result, Netflix has found that they need to significantly increase their spending on original content. In 2019 Netflix is expected to spend over $15 billion on their own original content. This expense coupled with the fact that other companies will be charging a higher cost for licensing their material will largely reduce Netflix’s margins. Other companies such as Apple (Apple TV+), Amazon (Prime Video), and AT&T (HBO) who are not already producing content for purposes outside of their streaming services will see similar effects. The chart below shows a comparison of what these types of competitors are spending on original content in 2019 relative to what Disney announced they’ll spend on Disney+ in 2020.
(Figure 12: Motley Fool)29
This plays favorably for Disney as the majority of their content comes from existing titles or titles that were already planned to be created. Because of this they will have the benefit of not having to spend nearly as much money on original content for their platform. Increase in Home Video Spending The chart below shows us that from 2016 to 2019 research on total home video spending has seen consumers opting for streaming services as opposed to the traditional cable TV. This trend will yield a positive outlook for Disney as they developed and released their streaming service with their own original and past content.
(Figure 13: Bloomberg Terminal)6
Industry Analysis
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The increase in spending by consumers on streaming services is partially offset by a decrease in DVD and Blu-ray sales, which will impact Disney’s Home Entertainment revenue stream. We see this trend continuing in a similar pattern as the estimates on the chart. This is due to consumers waiting for entertainment firms to move their content onto their streaming platforms rather than purchasing hard copies of Blu-rays or DVDs. As more and more content gets pushed onto streaming services we also will see a continuation of the trend of less people purchasing movies via pay-per view or video-on demand services. This will hinder Disney’s TV/SVOD distribution revenue in the future. However, we believe that this will also be offset by an even larger increase in revenue coming from the streaming services. 16 Decrease in Traditional TV Subscribers There has been an increase in consumers cutting the cord evident by major cable and satellite companies like Comcast and Dish suffering consecutive quarter over quarter losses in pay-tv subscribers. On the other side a la carte TV options like Sling TV and YouTube TV are seeing gains in subscribers. The tendency to cut the cord will initially happen slowly, but over time consumers will begin to cut the cord at a rapid pace as the streaming services become more developed and widely used.
(Figure 14: Bloomberg Terminal)6
We see this trend continuing and it will yield a positive outlook for Disney. With consumers cutting the cord, they will see an increase in the amount of subscribers looking for modern ways to watch TV. Disney has positioned themselves well in this competitive market as they are able to offer live TV via a streaming service platform with Hulu+Live TV. International broadband Expansion As shown in the graph below, there has been an increasing number of global broadband households. These large increases in the number of broadband homes provide an
area of opportunity for Disney to grow their subscriber base.
(Figure 15: Bloomberg Terminal)6
According to Strategy Analytics over 450 million households are expected to pay for streaming services by 2022 up from 250 million in 2018. This offers significant opportunity for growth for companies in the industry and competition for new users will be highly competitive. For Disney, this gives them a positive outlook as they have a brand that is well established and popular worldwide. As a result, they will likely be trusted by new users in the industry. Also, with the merger of 21CF they have acquired 75 million streaming subscribers in India via the Hotstar platform giving them a head start as they begin to fully launch Disney+ internationally in the Q Studio Entertainment Industry Adventure and action films have become the most popular genres in North America box offices and in 2019 were the top two movie genres in terms of box office revenue.20 Evidence of this can be seen in the chart below which gives a breakdown of box office revenue by genre.
(Figure 16 : Statista Box Office Revenues)20
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As a result, Disney is well positioned in the present and the future as they currently own Marvel, the most well-known cast of action heroes. The recent purchase of 21CF added even more well-known action heroes, most notably X-men and Fantastic Four. This will allow Disney to create not only independent films, but also combined films. Their latest installment of Avengers Endgame set the all-time box office sales record.28 Because of this, Disney has an encouraging outlook in the Studio Entertainment industry. Theme Park Industry The theme park industry has seen growth in recent years as the number of retired baby boomers looking for leisure activities in their free time has increased19. Analysts within the industry are projecting an 8.2% CAGR for the industry as a whole. While the US is the largest current market for theme parks the largest growth market can be found in the Asia-Pacific region. The CAGR for this region is estimated to be 12.2%.19 This can be seen on the following graph as 6 out of the top 8 year over year increases in park attendance come from the Asia-Pacific region.
(Figure 17 : Statista Attendance at Theme Parks)31
The incorporation of technology such as virtual reality, augmented reality and mobile applications to be used while in the park is a hot topic in the theme park in the industry. Disney is at the forefront of this technology, and in July 2019 their R&D team received a patent for a pair of augmented reality glasses that they created to be worn while in their parks. Porter’s Five Forces Competitive Rivalry: High Although Disney is a massive media conglomerate, they still experience strong competition. This comes from well-established firms in each of their business segments. These established firms continue to show strong aggressive strategies in their segments. As a result, this ensures that Disney stays innovative and forward thinking, evident by their penetration in the streaming industry. Also, this
presents a moderate differentiation between firms in the industry meaning they present similar content and experiences to consumers. Bargaining Power of Suppliers: Low Disney already has an extensive content library for their streaming services and thanks to acquisitions of Marvel, Lucasfilm, and most recently 221CF they have further added to this list. Therefore, they have a large enough library where they do not have to spend nearly as much money on content creation and licensing as other firms, like Netflix. Bargaining Power of Buyers: High Each of Disney’s revenue segments brings upon competitions, increasing the consumers bargaining power. In terms of the Interactive Media segment, consumers now have many alternative streaming services they can choose from. At their initial launch Disney took on the strategy of setting the starting price for Disney+ and their bundle low relative to other competition. These low prices will likely result in more people choosing Disney and also leave room for price increasing in the future. For their Parks & Resorts, there are a number of other theme parks to choose from. Therefore, if prices get to high then guests will resort to the cheaper park options. This occurrence recently took place for Disney. In 2019 Disney raised admission prices for their parks and in the 2019 Q3 earnings call management noted that they had fewer guests in the quarter than expected.
Threat of Substitutes: Low The recent trend of large media companies merging like AT&T and Time Warner and now recently Disney and 21CF, has created for a low threat for substitutes. Potential substitutes are normally too small and end up getting acquired by large media companies. Therefore, the competition Disney faces should stay relatively similar in the future. Consumers will have their choice between a few media companies, and we believe Disney has positioned themselves well in the future. Threat of New Entrants: Low New entrants will face incredibly strong hardships as they begin to penetrate the industry. They will not be big enough to pull consumers away from large well-established media companies. If they find success, these new entrants will likely be acquired by one of the large and well-established companies. As a result, Disney should not have to worry about the threat of new entrants.
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Decomposition of Revenue Media Networks Revenue in the Media Network segment is broken down into three areas: Affiliate Fees, Advertising and TV/SVOD Distribution Licensing. When taking a closer look at the historical performance of the Affiliate Fees and Advertising areas we noticed a near perfect inverse relationship in terms of year over year change in revenue between these two areas. This can be seen in the graph below as when Advertising revenue increased Affiliate Fees revenue decreased by approximately the same amount, and vice-versa.
(Figure 18: 2018 10k)23
For forecasting purposes, we chose to combine the two areas into one due to the off-setting increase/decrease effect. The two areas combined grew at an average of approximately 1.03% each year between 2012 and 2018. This minimal growth can be seen between the years 2016 and 2018 in the graph below which shows our forecasted growth for Affiliate Fees and Advertising.
(Figure 19: 2019 10Q & Krause Fund Analysts Forecasts)32
The spike in revenue from 2018 to 2019 is due to revenue added to the segment from the cable networks brought in
from 21CF. For future years we estimated growth will become negative for this area due to cutting the cord. As we discussed in the industry trends, cutting the cord will initially start slow and then decrease at a rapid pace. When forecasting this area, we applied similar decline rates. The negative growth rates we used for each year of our forecast can be seen in the graph below.
(Figure 20: Krause Fund Analysts Forecasts)
The TV/SVOD Distribution Licensing area of this segment we forecasted to grow at 4.25% each year going forward. This growth was determined based off of the recent positive growth in subscriber count that TV/SVOD platforms such as Sling TV and YouTube TV have seen recently. Parks & Resorts To forecast our Parks & Resorts revenue we used a breakdown of the total number of guests and average revenue spent by guests for both domestic and international parks. As can be seen in the chart below, Parks & Resorts revenue historically has increased steadily each year and therefore, we forecasted a steady rate for the years going forward.
(Figure 21: Krause Fund Analysts Forecasts)
The steady rate we used was calculated by taking the total domestic Parks & Resorts revenue and dividing it by the total number of guests at each park and resort (given in
Valuation Analysis
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most recent 10-K) for a 3 year historical period. This gave us an average revenue growth rate per guest of 3.62%. We then took the total number of guests at each park and hotels of a historical 3 year period to get an average growth rate of guest attendance of 2.83%. Forecasted guest spending multiplied by forecasted guest attendance was used to obtain the yearly estimates for Parks & Resorts domestic revenue. We did the same calculations with international parks and found an average revenue growth rate per guest of 9.48% and an average growth rate of guest attendance of 6.88%. The international averages are historically higher due to Disney recently expanding their theme parks into this territory, so we should expect more buzz around the attractions than domestically. A detailed version of this breakdown can be found on Park Assumptions page located on page 21.
Studio Entertainment Revenue in the Studio Entertainment segment is mostly driven by theatrical distributions, which fluctuates due to the tastes and preferences of the public. When forecasted we looked at anticipated releases of films for the future and compared those films to historical tastes and preferences of the public as many of the films were anticipated sequels. We also weighted Action and Adventure films more heavily since they have been the best box office performers in recent years. For example, in 2020 we anticipate a very strong year for Studio Entertainment. This is because Star Wars Episode 9, Frozen 2, and Marvel’s Black Window expect to release, which historically have provided extremely favorable box office numbers. An estimated $7.88 billion of Studio Entertainment’s revenue can be attributed to theatrical distributions in 2020. 2024 is the lowest estimated year as we project Disney to only bring in $6.65 billion from theatrical distributions. This is due to their currently not being any anticipated large releases planned. To calculate revenue for theatrical distributions in our CV year we took the average of the average revenues from 2019-2025. Home Entertainment revenue is declining due to consumers switching to streaming services opposed to purchasing physical DVDs and Blu-rays. As Disney focuses on moving its theatrical content to its new streaming platform, we anticipate this decline to continue. Our future estimates have a rapid increase in negative growth for the area before eventually beginning to even out as their will still be some small portion of consumers that prefer DVDs and Blu-rays. This can be seen in the graph below which shows our negative growth rates for Home Entertainment.
(Figure 22: Krause Fund Analysts Forecasts)
In terms of the TV/VSOD Distributing and Licensing segment, we predict it will increase at a steady growth rate of 3%. VSOD allows consumers to rent or purchase movies early before they hit go onto the streaming services. This increase helps partially offset the loss Disney experiences in its home entertainment segment. Consumer Products & Interactive Media In FY2019 Disney added the Interactive Media portion to this segment when they acquired majority control of Hulu and launched ESPN+. This led to a large increase in revenue for the segment of 93% year over year. Prior to 2019 the Consumer Products part of the segment had seen a decrease in revenue over each of the last 4 years. In our forecast for the segment we have separated these two areas and have the revenue attributable to Consumer Products decreasing at -2.88%. This is equivalent to the average decrease in revenue from the 4 years before they started gaining revenue from streaming content. For the Interactive Media area, we forecasted revenue by creating a breakdown of each of the 4 streaming packages offered by Disney in terms of the number of customers signed up. This breakdown can be found on page 20. Based off the 2019 Q4 earnings call on November 11, 2019 we know that at the end of FY2019 Hulu had 28.5 million customers signed up and ESPN+ had 3.4 million. We used these numbers as starting points for FY2020 and forecasted growth as a year over year percent increase in the number of subscribers. ESPN+ Growth Assumptions For ESPN+ we held growth at 2% each year with a CV growth rate in 2026 of 0.5%. The reasoning for this is because the ESPN+ service only attracts a niche group of consumers due to not offering marque games in major sports. Also, due to the cheap price point of the bundle package many people will tend to buy the bundle package rather than solely ESPN+.
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Hulu Growth Assumptions With Hulu our year over year growth rate varied. For FY2020 we believe that it will be small relative to there growth in prior years at 3%. This is because we believe that the launch of Disney+ will eat at their growth as more people opt to spend their money on the new offering in the market. We anticipate Hulu’s growth will bounce back in 2021 with a 10% growth rate due the hype of Disney+ beginning to wear off and the new offering of all FX shows going exclusively to Hulu. By the CV year of 2026 we have growth for Hulu leveled off at a rate in line with the rate of inflation. Disney+ and Bundle Growth Assumptions From an announcement made by Disney on November 13, 2019 we know that over 10 million people signed up for Disney+ within 24 hours of their initial launch. We combined this data with estimates from management and other analysts to come up with an estimated number of total sign ups in FY2020 to be 33.6m people for Disney+ and 12m people for the bundle. For the bundle of the 3 and Disney+ we wanted our forecast to represent rapid growth in terms of the number of subscribers in the first and second year. Consumers interested in the services will by then have already purchased it. We predict the growth rate to slow down and have smaller growth increase each year. The estimated growth in terms of number of subscribers for Disney+ and the bundled package is shown in the following graph.
(Figure 23 & 24: Krause Fund Analysts Forecasts)
Estimated subscriber count for each service over our forecasting period can be seen in the graph above. To come up with yearly revenue for the streaming services we multiplied the number of subscribers for the year by the price per month of each plan and by 12 months. We knew that the price points of each plan would change over time. Our projected price points are shown in the following chart:
(Figure 25: Krause Fund Analysts Forecasts)
Disney+ and the bundled package started out cheap relative to other options on the market as they were trying to get people signed up. Because of this we projected price increases as soon as year 2. As time goes on and yearly subscriber growth slows we projected that they will increase the monthly cost in order to account for the slowed growth. This follows what their top streaming competitor, Netflix, did when they saw subscriber growth slow. We anticipate that Hulu and ESPN+ will also see increases over time as subscriber growth slows. However, they will have less frequent price increases due to currently having a price point that mirrors their competition. A full breakdown of our streaming projections can be found page 20. Other Assumptions: Investments in Intangible Streaming Content, Net The Investments in Intangible Streaming Content line item on the balance sheet was created to reflect future spending on original content. In the 2019 Q4 earnings call on November 11, 2019 CEO Bob Iger detailed that Disney plans to spend $500 million in fiscal year 2020 on the creation of 45 new pieces of original content for Disney+. Mr. Iger then detailed that in the 5 years to follow, Disney will create 60 new pieces of original content per year. Since on average it will cost Disney $11,111,111 (500 million / 45) per piece of original content we forecasted that they will spend $667 million per year on this content for the next 5 years. We then grew this number by our rate of inflation each year. Amortization Expenses To reflect the amortization associated with Investments in Intangible Streaming Content we have created a separate expense account on the income statement which is labeled “Amortization Expense (Streaming Content, Net).” This was created because the original content created for the
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streaming service will be amortized at a faster rate than that of other intangibles. Disney has not yet provided details on how they will amortize their original content, so we modeled our amortization after that of Netflix who amortizes their original content using a double declining method of accelerated amortization. This is done to amortize the content at a faster rate because they believe the majority of viewers will watch the content within a certain short-term period of it being uploaded. Income Taxes We forecasted Income taxes using Disney’s marginal tax rate from their 2018 10-k multiplied by their EBIT. The marginal tax rate is calculated using their tax expense from federal, state, and foreign and dividing the sum over the tax expense from the income statement. This yields a rate of 22.02%, which becomes more accurate as the recent tax cut (went into effect at the end of 2017) combined with the old tax rate skewed Disney’s effective tax rate. Weighted Average Cost of Capital (WACC) We calculated Disney’s WACC to be 6.089%. The WACC is a key component in the Discounted Cash Flow (DCF) and Economic Profit (EP) calculations used to determine the intrinsic value of Disney. Cost of Equity: Risk Free Rate: 1.93% Beta: 0.87925 Expected Market Risk Premium: 5.44% Cost of Equity: 6.7131% In order to calculate the cost of equity we used the Capital Asset Pricing Model (CAPM). For the risk-free rate, we used the current rate of the 10-year US Treasury note. We calculated the beta using the average of the 1yr, 2yr, 3yr, and 4yr betas. We excluded the 5yr beta, as we believed it to be considered an outlier from the other years. We modeled the expected market risk premium using Damodaran’s TTM cash yield. Cost of Debt To calculate Disney pre-tax cost of debt we used the yield of a 30-year bond that Disney currently has outstanding. The 30-year bond has a YTM of 3.538%. Our marginal tax rate was 22.02%. Discounted Cash Flow (DCF)/ Economic Profit (EP) Using the DCF/EP method we calculated the intrinsic value for Disney, as of November 15, 2019, to be $171.46 We believe this is the most accurate representation that we have of Disney’s true value as it encompasses all of the important factors that drive Disney’s bottom-line including revenues, expenses, key balance sheet accounts, and free cash flows. Disney’s free cash flows are an important
factor for their future because although they are choosing to sacrifice some cash in the short-term to develop and implement their direct to consumer streaming service, it will end up having a positive effect on their FCF in the long-term. Dividend Discount Model Using the Dividend Discount Model, we calculated an intrinsic value for Disney, as of November 15, 2019, to be $100.84. We do not think this is a great valuation method to determine the stock price. We believe Disney plans to reinvest a higher proportion of their proceeds than they historically have in order to continue to develop their streaming services in what is a highly competitive direct-to-consumer industry. Relative Valuation Since Disney primarily faces a different set of competitors in each of its segments, we pulled top competitors from each area and used a weighted average to create our relative valuation. Since we were finding the one-year forward P/E ratio the weights used in calculating this average were equal to the estimated percent of total revenue for each segment in 2020. This breakdown of weights can be seen on page 32. Using this method for comparisons we calculated Disney’s relative valuation to be $120. This was done by multiplying the average forward P/E ratio of the competition (19.57) by Disney’s forecasted EPS ($6.16). We believe that this does not accurately represent the value of Disney as the average forward P/E ratio is weighed down by the competitors in the Media and Studio Entertainment industries. The majority of Disney’s competition in these industries trade at a significantly lower P/E ratio than Disney does. We believe that this is because Disney, with a $260 billion market cap, is a significantly larger firm than these competitors and has more diverse streams of revenue. Also, in 2020 the Media segment still makes up the largest portion of estimated revenue by segment, so it has the heaviest weight. By breaking competition down into each industry and using a weighted average we tried to paint the most accurate picture of how Disney is made up. However, since Disney has such a wide variety of products there is no other company that it can closely be compared to. This is another reason that we believe relative valuation is not a good method for valuing Disney.
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Sensitivity Analysis Beta vs Equity Risk Premium Analyzing the Beta and Expected Market Risk premium allows us to better understand how market volatility can affect Disney’s intrinsic value. Beta is a measure of systematic risk of a stock compared to the market as a whole. Disney has a low beta of 0.8792 because they are a media conglomerate and a mature firm, so they do not possess as much risk due to sheer size. That being said, with its recent penetration into the direct-to-consumer market it will be important to look at the change in beta as it potentially could expose them to risk as they are entering a market that is new to them. For example, Netflix is the leader in this area and has a beta is much higher at 1.36.
WACC vs CV Growth CV growth is a key metric in the calculation of DCF/EP, which ultimately gives us the intrinsic value. A 0.20% decrease has about a $10 decline in Disney’s stock price. The CV growth shows the rate we estimate Disney will grow steadily at in the future. This rate, projected 7 years in the future, could experience some volatility due to external factors from the industry and economy, which is out of Disney’s control. Also, we decided to test the effects of WACC and saw a 0.3% increase resulted in a stock price decline of around $13. This shows that Disney has potentially higher risk associated to its capital possibly due to its investments in their new direct to consumer streaming services.
CV Growth vs Pre-Tax Cost of Debt The CV growth is an important metric used in both the DCF and EP models because a large proportion of the value is determined in the CV year. The chart shows a 0.2% increase has a about a $4 increase on the intrinsic value. Also, increasing the pre-tax cost of debt by 0.3% has a very small impact on Disney’s stock price. Since we predict the Federal Reserve to increase interest rates, we believe the pre-tax cost of debt could increase. With such a small decrease in Disney’s intrinsic value this should not affect Disney much in the future.
Marginal Tax Rate vs Risk Free Rate Marginal Tax Rate is a key metric to find the ROIC of Disney, which is used to determine the intrinsic value. The tax rate has the potential to shift, due to the possibility of a change in presidency in 2020. Because of this we believe it is important to see how the affect could alter Disney’s intrinsic value. A 1% increase in the marginal tax rate declined Disney’s intrinsic value by around $2.50. With the future election nearing this is good for Disney as they know that even if we see a tax reform from a new cabinet it will not have a large affect the overall value of the company. Also, we believe it is important to test the changes in the risk-free rate because it has fluctuated historically.
Receivables vs CV ROIC A 3% increase in accounts receivables yields about a $1.50 increase in Disney’s intrinsic value. Receivables is one of Disney’s largest current assets on the balance sheet. Receivables are forecasted using an average historical percentage of sales multiplied by current year sales. Since receivables make up the majority of Disney’s current assets, we wanted to sensitivity test the percent of sales used for the forecast to see what effect it would have on our price if a different percent of sales were used. For example, we believe there could be a recession in the future and in recessionary times firms have increased receivables so we wanted to see what affect this may have if it were to take place. Also, by testing the CV ROIC we wanted to see how sensitive the intrinsic value is if Disney did not see as high of a return on their invested capital as originally predicted.
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Important Disclaimer This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.
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1. Gross Domestic Product. (n.d.). Retrieved from https://www.bea.gov/data/gdp/gross-domestic-product.
2. Amadeo, K. (2019, July 10). Four Critical Components of America's Economic Growth. Retrieved from https://www.thebalance.com/components-of-gdp-explanation-formula-and-chart-3306015.
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13. Amusement and theme park attendance in North America 2018. (n.d.). Retrieved from https://www.statista.com/statistics/194269/attenda
nce-at-theme-and-amusement-parks-in-north-america-since-2010/.
14. Alexander, J. (2019, September 18). NBCUniversal's new streaming service could spell trouble for Hulu. Retrieved from https://www.theverge.com/2019/9/18/20870783/nbcuniversal-peacock-streaming-wars-hulu-netflix-office-parks-and-recreation-snl-exlcusives.
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16. Whitten, S. (2019, August 6). Nearly 25% of households will ditch traditional TV by 2022. Retrieved from https://www.cnbc.com/2019/08/06/nearly-25percent-of-households-will-ditch-traditional-tv-by-2022.html.
17. Sims, D. (2019, March 21). Hollywood Makes Way for the Disney-Fox Behemoth. Retrieved from https://www.theatlantic.com/entertainment/archive/2019/03/disney-fox-merger-and-future-hollywood/585481/.
18. Disney, Co. Earnings Call Q4 2019, 2019. Web. 7 November 2019.
19. By. (2019, September 19). Global Amusement Park Market Overview 2019-2023: Segmented by Geography Trends and Opportunities growing with CAGR of 8%. Retrieved from https://www.marketwatch.com/press-release/global-amusement-park-market-overview-2019-2023-segmented-by-geography-trends-and-opportunities-growing-with-cagr-of-8-2019-09-19.
20. Movie genres by total box office revenue in North America 2019. (n.d.). Retrieved from https://www.statista.com/statistics/188658/movie-genres-in-north-america-by-box-office-revenue-since-1995/.
21. Smith, C. (2019, April 15). Important Disney Acquisitions Over Time: Disney History. Retrieved from https://disneynews.us/important-disney-acquisitions-time-disney-history/.
22. Amobi, T. N. (2019, October 7). Industry Survey: Global Media & Communications. Retrieved from https://www-capitaliq-com.proxy.lib.uiowa.edu/CIQDotNet/Research/DocumentViewer.aspx?documentViewerDocumentId=42652903.
23. Disney, Co. Form 10k 2018, 2019. Web. 29 September 2019.
24. Hastings, N. (2019, November 2). ESPN : Everything you need to know about ESPN's streaming service. Retrieved from https://www.businessinsider.com/what-is-espn-plus.
References
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25. Brown, L. (2017, December 17). Walt DisneyCompany SWOT Analysis & Recommendations.Retrieved from http://panmore.com/walt-disney-company-swot-analysis-recommendations.
26. Here Are All the Movies Disney Is Releasing forthe Next 8 Years. (2019, May 22). Retrieved fromhttps://redtri.com/disney-movies-through-2027/.
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28. Top Lifetime Grosses. (n.d.). Retrieved fromhttps://www.boxofficemojo.com/chart/top_lifetime_gross/?area=XWW&landingModalImageUrl=https://m.media-amazon.com/images/G/01/IMDbPro/images/home/welcomeToBomojov2._CB1571421611_.png.
29. Lovely, S. (2019, September 8). How Much Arethe Streaming Giants Spending on Content?Retrieved fromhttps://www.fool.com/investing/2019/09/08/how-much-are-streaming-giants-spending-on-content.aspx.
30. Disney, Co. Earnings Call Q3 2019, 2019. Web. 6August 2019.
31. Rising / declining attendance at theme parksworldwide 2017-2018. (n.d.). Retrieved fromhttps://www.statista.com/statistics/194286/percentage-change-in-attendance-at-amusement-parks-worldwide-2009-2010/.
32. Disney, Co. Form 10Q 2019, 2019. Web. 7November 2019.
Walt Disney CompanyRevenue Decomposition
Fiscal Year Ending September 30th 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E CV 2026E
Total Revenue 55,137 59,434 72,650 79,320 84,771 89,750 93,664 95,043 97,285 100,210 YoY Growth ‐0.89% 7.79% 22.24% 9.18% 6.87% 5.87% 4.36% 1.47% 2.36% 3.01%
Revenue Decomposition by Segment:Media Networks
Affiliate Fees & Advertising 20,788 21,042 24,887 24,576 24,207 23,723 23,011 21,976 20,657 19,005 TV/SVOD Distributing Licensing 2,722 3,458 3,605 3,758 3,918 4,084 4,258 4,439 4,628 4,824
Total Revenue for Media Networks 23,510 24,500 28,492 28,334 28,125 27,808 27,269 26,415 25,285 23,829 YoY Growth ‐0.76% 4.21% 16.29% ‐0.55% ‐0.74% ‐1.13% ‐1.94% ‐3.13% ‐4.28% ‐5.76%
Parks & ResortsTotal Guests @ domestic parks/hotels 97 100 103 106 109 112 115 118 121 125Average Revenue per Visitor Domestic 153 162 168 174 180 186 193 200 207 215Total Domestic Revenue 14,812 16,161 17,219 18,346 19,547 20,827 22,190 23,643 25,191 26,840
Total Guests @ International parks/hotels 89 94 100 107 114 122 131 140 149 160 Average Revenue per Visitor International 40 44 48 53 58 60 61 63 65 67 Total International Revenue 3,603 4,135 4,838 5,661 6,624 7,280 8,001 8,793 9,663 10,619
Total Revenue for Parks & Resorts Revenue 18,415 20,296 22,057 24,008 26,172 28,107 30,191 32,436 34,854 37,459 YoY Growth 8.49% 10.21% 8.68% 8.84% 9.01% 7.39% 7.41% 7.43% 7.46% 7.48%
Studio EntertainmentTheatrical Distribition 2,903 4,303 7,640 7,881 7,022 7,465 7,008 6,652 7,097 7,429 Home Entertainment 1,798 1,750 1,575 1,260 932 662 450 302 199 129 SVOD distribution and other 3,678 3,934 3,875 3,817 3,760 3,703 3,648 3,593 3,539 3,486 Total Revenue for Studio Entertainment 8,379 9,987 13,090 12,958 11,714 11,830 11,106 10,547 10,835 11,044
YoY Growth ‐11.25% 19.19% 31.07% ‐1.01% ‐9.59% 0.99% ‐6.12% ‐5.03% 2.74% 1.93%
Consumer Products & Interactive MediaTotal Revenue for CP & IM 4,833 4,651 9,011 14,020 18,760 22,005 25,097 25,646 26,310 27,877
YoY Growth ‐12.57% ‐3.77% 93.74% 55.59% 33.81% 17.30% 14.05% 2.18% 2.59% 5.95%‐2.88%
Revenue Decomposition for Streaming ServicesPortion of CP&IM Rev attributed to streaming services
# of users 2019A 2020E 2021E 2022E 2023E 2024E 2025E CV 2026EHulu 28.50 29.36 32.29 34.23 35.25 35.96 36.32 36.68Dis+ 33.60 57.12 62.83 65.97 67.95 69.31 70.00ESPN+ 3.40 3.47 3.54 3.61 3.68 3.75 3.83 3.85Bundle 12.00 21.00 23.10 24.26 24.98 25.48 25.86
Revenue
Hulu (assuming 11.99/month) 341.72 351.97 387.16 410.39 457.96 467.12 471.79 513.19Dis+ (assuming 6.99/month) 234.86 456.39 627.69 791.02 814.75 831.05 909.36ESPN+ (assuming 4.99/month) 16.97 17.31 17.65 18.00 22.04 22.49 22.94 26.90
Bundle of all three (15.99/month) 155.88 293.79 369.37 412.09 424.46 458.43 465.30
Total Revenue from streaming services for year 4,304.17 9,120.19 13,859.92 17,105.50 20,197.44 20,745.76 21,410.41 22,977.08
Price Point Assumptions for streaming services: 2019A 2020E 2021E 2022E 2023E 2024E 2025E CV 2026EHulu 11.99 11.99 11.99 11.99 12.99 12.99 12.99 13.99Dis+ 6.99 7.99 9.99 11.99 11.99 11.99 12.99ESPN+ 4.99 4.99 4.99 4.99 5.99 5.99 5.99 6.99Bundle of all 3 12.99 13.99 15.99 16.99 16.99 17.99 17.99
Revenue from streaming services flow into the Consumer Products and Interactive Media Segment's revenue
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20.00
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40.00
50.00
60.00
70.00
80.00
2019A 2020E 2021E 2022E 2023E 2024E 2025E CV 2026E
Estimated Subscriber Count 2020‐2026
Hulu Dis+ ESPN+ Bundle
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2019 2020 2021 2022 2023 2024 2025 2026
Subscriber Count Over Time
Dis+ Bundle
Assumptions used for Parks & Resorts Revenue CalculationParks and Resorts 2016 2017 2018 Hotels Domestic 2016 2017 2018Domestic Revenue 14,242.00 14,812.00 16,161.00 Available Room Nights (in Millions) 10.38 10.21 10.05 Magic Kingdom Occupancy 0.89 0.88 0.88
# of vistors per year 20.40 20.45 20.86 Per Room Guest Spending 305.00 317.00 345.00 Average Rev per vistor Total Domestic Visitors 9.24 8.98 8.84
Epcot Total Rev from Domestic Hotels 2,818.19$ 2,846.79$ 3,049.66$ # of vistors per year 11.70 12.20 12.44 Average Rev per vistor Hotels International 2016 2017 2018
Disney's Animal Kingdom Available Room Nights 2.60 3.02 3.18 # of vistors per year 10.80 12.50 13.75 Occupancy 0.78 0.80 0.86 Average Rev per vistor Per Room Guest Spending 278.00 289.00 297.00
Disney's Hollywood Studios Total International Visitors 2.03 2.42 2.73
# of vistors per year 10.80 10.72 11.26 Total Rev from International Hotels 563.78$ 698.69$ 811.98$ Average Rev per vistor
Blizzard Beach Growth# of vistors per year 2.10 1.95 2.00 Growth ratAverage Rev per vistor Domestic 2016->2017 2017->2018
Typhoon Lagoon Growth Rate for Total # of Guests 2.4269% 3.2232%# of vistors per year 2.30 2.16 2.27 Average Growth for Total # of Guests 2.83%Average Rev per vistor Growth Rate of Rev per Guest 1.5380% 5.7005%
Disneyland Average Growth for Rev per Guest 3.62%# of vistors per year 17.90 18.30 18.67 Average Rev per vistor International 2016->2017 2017->2018
Disneyland California Adventure Growth Rate for Total # of Guests 8.9290% 4.8283%# of vistors per year 9.30 9.57 9.86 Average Growth for Total # of Guests 6.88%Average Rev per vistor Growth Rate of Rev per Guest 21.07% 9.48%
Total Domestic Vistors 85.30 87.85 91.12 Average Growth for Rev per Guest 9.48%
* Thought the 21.07% was not sustainable and# of Domestic Hotel Guests 9.24 8.98 8.84 the 9.48% was more realistic going forwardTotal Guests @ domestic parks/hotels 94.54 96.83 99.96 so did not use average Average Revenue per Visitor Domestic 150.65$ 152.96$ 161.68$ Total Domestic Revenue 14,242 14,812 16,161
Total Visitors (Millions)International Revenue 2,732.00 3,603.00 4,135.00 2016 2017Tokyo Disney Resort Domestic Parks 94.54 96.83
# of vistors per year 30.00 30.10 30.10 YoY Growth 0.024269309Average Rev per vistor International Parks 80.06 87
Tokyo Disneyland YoY Growth 0.086684986# of vistors per year 16.50 16.60 17.91 Average Rev per vistor
Tokyo DisneySea# of vistors per year 13.46 13.50 14.65 Average Rev per vistor
Disneyland Paris Growth rate for avg revenue per international visitor# of vistors per year 8.40 9.60 9.84 Average Rev per vistor
Hong Kong Disneyland *using the 9% for # of vistors per year 6.10 6.20 6.70 Average growthAverage Rev per vistor
Shanghai Disney Resort Growth rate of total guests @ international parks# of vistors per year 5.60 11.00 11.80 0.089289543 0.048282888Average Rev per vistor
Total International Vistors 80.06 87.00 91.00 Average growth 6.88%
# of International Hotel Guests 2.03 2.42 2.73 Total Guests @ International parks/hotels 82.09 89.42 93.73 *Significantly lower on average because DIS is not majority owner in international parksAverage Revenue per Visitor International 33.28$ 40.29$ 44.11$ Total International Revenue 2,732.00$ 3,603.00$ 4,135.00$
Walt Disney CompanyIncome Statement
Fiscal Year Ending September 30th 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026ERevenue By Segment:
Media Networks 23,510 24,500 28,492 28,334 28,125 27,808 27,269 26,415 25,285 23,829 Parks & Resorts 18,415 20,296 22,057 24,008 26,172 28,107 30,191 32,436 34,854 37,459 Studio Entertainment 8,379 9,987 13,090 12,958 11,714 11,830 11,106 10,547 10,835 11,044 Consumer Products & Interactive Media 4,833 4,651 9,011 14,020 18,760 22,005 25,097 25,646 26,310 27,877
Total revenues 55,137 59,434 72,650 79,320 84,771 89,750 93,664 95,043 97,285 100,210
Costs & ExpensesCost of Products and Services (30,306) (32,726) (41,047) (44,855) (47,938) (50,754) (52,967) (53,747) (55,014) (56,669) Selling, General, Administrative & Other Expenses (8,176) (8,860) (11,261) (12,295) (13,140) (13,911) (14,518) (14,732) (15,079) (15,533) Depreciation Expense (2,586) (2,758) (2,774) (2,968) (3,068) (3,183) (3,313) (3,457) (3,617) (3,792) Amortization Expense (Net Intangibles) (196) (253) (233) (793) (766) (739) (714) (690) (666) (644) Amortization Expense (Net Streaming Content Intangibles) - - - ‐ (85) (165) (231) (286) (331) (369)
Total Costs & Expenses (41,264) (44,597) (55,315) (60,910) (64,997) (68,752) (71,743) (72,911) (74,708) (77,006)
Restructuring & Impairment Charges (98) (33) (1,183) (232) (248) (262) (274) (278) (284) (293) Other Income (expense), Net 78 601 - ‐ ‐ ‐ ‐ ‐ ‐ ‐ Interest Income (expense), Net (385) (574) (978) (1,496) (1,453) (1,401) (1,336) (1,244) (1,176) (1,090) Equity in the Income (loss) of Investees, Net 320 (102) (103) 503 503 503 503 503 503 503
Income Before Income Taxes 13,788 14,729 15,072 17,185 18,577 19,837 20,814 21,113 21,619 22,324 Income Taxes (4,422) (1,663) (3,319) (3,784) (4,091) (4,368) (4,583) (4,649) (4,760) (4,916)
Net Income 9,366 13,066 11,753 13,401 14,486 15,469 16,231 16,464 16,858 17,408 Less: Net Loss (income) Attributable to Noncontrolling Interests (386) (468) (683) (746) (797) (844) (880) (893) (914) (942)
Net Income Attributable to The Walt Disney Company (Dis) $8,980 $12,598 $11,070 $12,655 $13,689 $14,625 $15,350 $15,571 $15,944 $16,466
Earnings per share attributable to DisneyBasic 5.73$ 8.40$ 6.71 6.16 5.97 6.47 6.89 7.08 7.35 7.69
Weighted average number of commmon & common equivalent shares outstanding
Total Shares Outstanding 1,507 1498 1,800 2,311 2,276 2,243 2,213 2,184 2,155 2,128Weighted average 1,568 1,499 1649 2056 2294 2260 2228 2198 2170 2141
Dividends declared per share1.56$ 1.68$ 1.76 1.76 1.76 1.80 1.80 1.85 1.89 1.96
Walt Disney CompanyBalance Sheet
Fiscal Year Ending September 30th 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E ASSETSCurrent Assets
Cash & Cash Equivalents 4,017 4,150 5,418 2,851 5,919 10,215 14,757 21,631 27,374 33,423 Receivables 8,633 9,334 15,481 15,283 16,333 17,292 18,047 18,312 18,744 19,308 Inventories 1,373 1,392 1,649 2,459 2,628 2,782 2,903 2,946 3,016 3,106 Television Costs & Advances 1,278 1,314 4,597 3,538 3,781 4,003 4,178 4,239 4,339 4,470 Other Current Assets 143 159 979 756 808 856 893 906 928 955
Total current assets 15,889 16,825 28,124 24,886 29,469 35,149 40,778 48,035 54,401 61,262
Film & Television Costs 7,481 7,888 22,810 24,904 26,616 28,179 29,408 29,841 30,544 31,463 Investments 3,202 2,899 3,224 3,286 3,350 3,414 3,480 3,547 3,616 3,686 Parks, Resorts, and Other Property
Gross Attractions, Buildings, Equipment & Land 57,443 60,304 64,018 68,056 72,349 76,913 81,764 86,920 92,401 98,228 Accumulated Depreciation (29,037) (30,764) (32,415) (35,383) (38,451) (41,634) (44,947) (48,404) (52,021) (55,813)Attractions,Buildings, Equipment & Land, net 28,406 29,540 31,603 32,674 33,898 35,279 36,817 38,516 40,380 42,415
Investments in Intangible Streaming Content, net - - - 500 969 1,358 1,680 1,948 2,171 2,355 Intangible Assets, net 6,995 6,812 23,215 22,422 21,657 20,917 20,203 19,513 18,847 18,203 Goodwill 31,426 31,269 80,293 80,293 80,293 80,293 80,293 80,293 80,293 80,293 Other Assets 2,390 3,365 4,715 4,306 4,602 4,872 5,084 5,159 5,281 5,440
Total assets 95,789 98,598 193,984 193,271 200,853 209,460 217,743 226,853 235,533 245,117
LIABILITIES AND STOCKHOLDER'S EQUITYLIABILITIESCurremt Liabilities
Accounts Payable & Other Accrued Liabilities 8,855 9,479 17,942 16,435 17,565 18,597 19,408 19,693 20,158 20,764 Current Portion of Borrowings 6,172 3,790 8,857 7,500 6,606 6,410 5,536 6,871 6,871 6,871 Deferred Revenue & Other Current Liabilities 4,568 4,591 4,722 5,164 5,519 5,843 6,098 6,188 6,334 6,524
Total Current Liabilities 19,595 17,860 31,521 29,100 29,690 30,850 31,042 32,752 33,363 34,159 Borrowings 19,119 17,084 38,129 36,918 38,050 38,793 39,571 40,115 40,847 41,736 Deferred Income Taxes 4,480 3,109 7,902 8,225 8,575 8,948 9,340 9,737 10,144 10,564 Other Long-term Liabilities 6,443 6,590 13,580 12,647 13,516 14,310 14,934 15,154 15,511 15,977 Redeemable Noncontrolling Interests 1,148 1,123 8,963 8,575 8,683 8,782 8,860 8,887 8,932 8,990
Total Liabilities 50,785 45,766 100,095 95,465 98,514 101,684 103,746 106,645 108,796 111,426 STOCHOLDER'S EQUITY
Common Stock ($0.01 par value) 36,248 36,779 53,907 54,102 54,296 54,491 54,685 54,707 54,707 54,707 Retained Earnings (accumulated deficit) 72,606 82,679 42,494 51,531 61,184 71,742 83,082 94,585 106,429 118,698 Accumulated Other Comprehensive Income (loss) (3,528) (3,097) (6,617) (6,617) (6,617) (6,617) (6,617) (6,617) (6,617) (6,617)Stockholders' Equity Subtotal 105,326 116,361 89,784 99,016 108,863 119,615 131,150 142,675 154,518 166,787 Treasury Stock, at cost 64,011 67,588 907 6,221 11,536 16,850 22,165 27,479 32,794 38,108
Total Disney Shareholders' equity 41,315 48,773 88,877 92,794 97,327 102,765 108,985 115,196 121,725 128,679 Noncontrolling Interests 3,689 4,059 5,012 5,012 5,012 5,012 5,012 5,012 5,012 5,012
Total Equity 45,004 52,832 93,889 97,806 102,339 107,777 113,997 120,208 126,737 133,691 Total Liabilities and Equity 95,789 98,598 193,984 193,271 200,853 209,460 217,743 226,853 235,533 245,117
Walt Disney CompanyCash Flow Statement
Fiscal Year Ending September 30th 2017 2018 2019Operating Activities
Net income (loss) 9,366 13,066 11,070
Depreciation & amortization 2,782 3,011 3,007
Gain on acquisitions & dispositions (289) (560) 4,794
Deferred income taxes 334 (1,573) 117
Equity in the loss (income) of investees (320) 102 103
Cash distributions received from equity investees 788 775 754
Net change in film & television costs & advances (1,075) (523) (542)
Equity-based compensation 364 393 711
Other adjustments 503 441 206
Changes in operating assests and liabilities
Receivables 107 (720) 55
Inventories (5) (17) (223)
Other assets (52) (927) 932
Accounts payable & other accrued liabilities (368) 235 191
Income taxes 208 592 (6,599)
Net cash flows from operating activities 12,343 14,295 5,984
Investing ActivitiesInvestments in parks, resorts & other property (3,623) (4,465) 4,876
Sales of investments or proceeds from dispositions - -
Business Acquisitions (Goodwill) (417) (1,581) (9,901)
Other investing activities (71) 710 (319)
Net cash flows from investing activities (4,111) (5,336) (5,344)
Financing ActivitiesCommercial paper borrowings (payments), net 1,247 (1,768) 4,318
Borrowings 4,820 1,056 38,240
Reduction of borrowings (2,364) (1,871) (38,881)
Dividends (2,445) (2,515) (2,895)
Repurchases of common stock (9,368) (3,577) -
Proceeds from exercise of stock options 276 210 318
Contributions from noncontrolling interest holders 17 399 737
Acquisition of noncontrolling interests - - 1,430
Other financing activities (1,142) (777) (871)
Net cash flows from financing actvities (8,959) (8,843) (464)
Impact of exchange rates on cash, cash equivalents & restricted cash 31 (25) (98)
Change in cash, cash equivalents & restricted cash (696) 91 1,300
Cash, cash equivalents & restricted cash, beginning of year 4,760 4,064 4,155
Cash, cash equivalents & restricted cash, end of year 4,064 4,155 5,455
Walt Disney CompanyCash Flow Statement
Fiscal Year Ending September 30th 2020E 2021E 2022E 2023E 2024E 2025E 2026ENet Income 12,655 13,689 14,625 15,350 15,571 15,944 16,466 Adjust to reconcile Net IncomeDepreciation Expense 2,968 3,068 3,183 3,313 3,457 3,617 3,792 Amortization Expense (Net Intangibles) 793 766 739 714 690 666 644 Amortization Expense (Net Streaming Content Intangibles) ‐ 85 165 231 286 331 369
16,416 17,523 18,548 19,377 19,718 20,227 20,902 Change in Deferred Taxes 323 349 373 392 397 407 420
Changes in Working Capital AccountsReceivables 198 (1,050) (959) (754) (266) (432) (564)Inventories (810) (169) (154) (121) (43) (69) (91)Television costs & advances 1,059 (243) (222) (175) (62) (100) (130)Other Current Assets 223 (52) (47) (37) (13) (21) (28)Accounts payable & other accrued liabilities (1,507) 1,130 1,032 811 286 464 606 Deferred revenue & other current liabilities 442 355 324 255 90 146 190
Net Cash Provided by Operations-continueing Operations 16,345 17,843 18,894 19,748 20,107 20,621 21,306
Investing Activities(Increase)/Decrase in Film & television costs (2,094) (1,712) (1,563) (1,229) (433) (704) (918)(Increase)/Decrase in Investments (62) (63) (65) (66) (67) (68) (70)Capital Expenditures (4,038) (4,293) (4,563) (4,851) (5,156) (5,481) (5,827)Capital Expenditures in Intangible Streaming Assets (500) (469) (389) (323) (268) (222) (185)Business Acquisitions (Goodwill) ‐ ‐ ‐ ‐ ‐ ‐ ‐ (Incrase)/Decrease in other assets 409 (296) (270) (212) (75) (122) (159)
Net Cash Provided by Investing Activities (6,285) (6,833) (6,850) (6,681) (6,000) (6,598) (7,158)
Financing ActivitiesChange in Current portion of borrowings (1,357) (894) (196) (874) 1,335 ‐ ‐ Changes in Issuance (payments of borrowings) (1,211) 1,132 744 778 544 732 888 Payment of Dividends (3,618) (4,037) (4,067) (4,010) (4,067) (4,101) (4,197) Proceeds from Issuance of Common Stock 195 195 195 195 21 ‐ ‐ Noncontrolling Interest Liabilities (388) 108 99 78 27 45 58 Other long-term liabilities (933) 869 794 624 220 357 466 Repurchases of Common Stock (5,314) (5,314) (5,314) (5,314) (5,314) (5,314) (5,314)
Net Cash Provided by Financing Activities (12,627) (7,942) (7,747) (8,525) (7,234) (8,281) (8,099)
Change in Cash (2,567) 3,068 4,296 4,542 6,874 5,743 6,049 Beginning Yr Cash 5,418 2,851 5,919 10,215 14,757 21,631 27,374 Ending Yr Cash 2,851 5,919 10,215 14,757 21,631 27,374 33,423
Walt Disney CompanyCommon Size Income StatementPercent of salesFiscal Year Ending September 30th 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026ERevenues:
Media Networks 42.64% 41.22% 39.22% 35.72% 33.18% 30.98% 29.11% 27.79% 25.99% 23.78%
Parks & Resorts 33.40% 34.15% 30.36% 30.27% 30.87% 31.32% 32.23% 34.13% 35.83% 37.38%
Studio Entertainment 15.20% 16.80% 18.02% 16.34% 13.82% 13.18% 11.86% 11.10% 11.14% 11.02%
Consumer Products & Interactive Media 8.77% 7.83% 12.40% 17.68% 22.13% 24.52% 26.80% 26.98% 27.04% 27.82%
Total revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Costs & ExpensesCost of services and products 53.91% 54.96% 55.06% 56.50% 56.55% 56.55% 56.55% 56.55% 56.55% 56.55%
Selling, general, administrative & other expenses 15.74% 14.83% 14.91% 15.50% 15.50% 15.50% 15.50% 15.50% 15.50% 15.50%
Depreciation & amortization 4.17% 4.69% 4.64% 3.82% 3.74% 3.62% 3.55% 3.54% 3.64% 3.72%
Total Costs & Expenses 74.19% 74.84% 75.04% 76.14% 76.79% 76.67% 76.60% 76.60% 76.71% 76.79%
Restructuring & impairment charges 0.18% 0.06% 1.63% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29%
Interest income (expense), net -0.70% -0.97% -1.35% -1.89% -1.71% -1.56% -1.43% -1.31% -1.21% -1.09%
Equity in the income (loss) of investees, net -0.58% 0.17% 0.14% -0.63% -0.59% -0.56% -0.54% -0.53% -0.52% -0.50%
Income Before Income Taxes 25.01% 24.78% 20.75% 21.67% 21.91% 22.10% 22.22% 22.21% 22.22% 22.28%
Income taxes -8.02% -2.80% -4.57% -4.77% -4.83% -4.87% -4.89% -4.89% -4.89% -4.91%
Net Income 16.99% 21.98% 16.18% 16.89% 17.09% 17.24% 17.33% 17.32% 17.33% 17.37%
Less: net loss (income) attributable to noncontrolling interests -0.70% -0.79% -0.94% -0.94% -0.94% -0.94% -0.94% -0.94% -0.94% -0.94%
Net income attributable to The Walt Disney Company (Disney) 16.29% 21.20% 15.24% 15.95% 16.15% 16.30% 16.39% 16.38% 16.39% 16.43%
Walt Disney CompanyCommon Size Balance SheetPercent of salesFiscal Year Ending September 30th 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026EASSETSCurrent Assets
Cash & cash equivalents 7.29% 6.98% 7.46% 3.59% 6.98% 11.38% 15.76% 22.76% 28.14% 33.35%
Receivables 15.66% 15.70% 21.31% 19.27% 19.27% 19.27% 19.27% 19.27% 19.27% 19.27%
Inventories 2.49% 2.34% 2.27% 3.10% 3.10% 3.10% 3.10% 3.10% 3.10% 3.10%
Television costs & advances 2.32% 2.21% 6.33% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46%
Other current assets 0.26% 0.27% 1.35% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% 0.95%
Total current assets 28.82% 28.31% 38.71% 31.37% 34.76% 39.16% 43.54% 50.54% 55.92% 61.13%
Film & television costs 13.57% 13.27% 31.40% 31.40% 31.40% 31.40% 31.40% 31.40% 31.40% 31.40%
Investments 5.81% 4.88% 4.44% 4.14% 3.95% 3.80% 3.72% 3.73% 3.72% 3.68%
Parks, resorts, and other property
Gross Attractions, Buildings, Equipment & Land 104.18% 101.46% 88.12% 85.80% 85.35% 85.70% 87.29% 91.45% 94.98% 98.02%
Accumulated depreciation -52.66% -51.76% -44.62% -44.61% -45.36% -46.39% -47.99% -50.93% -53.47% -55.70%
Investments in Intangible Streaming Content, net 0.00% 0.00% 0.00% 0.63% 1.14% 1.51% 1.79% 2.05% 2.23% 2.35%
Intangible assets, net 12.69% 11.46% 31.95% 28.27% 25.55% 23.31% 21.57% 20.53% 19.37% 18.17%
Goodwill 57.00% 52.61% 110.52% 101.23% 94.72% 89.46% 85.72% 84.48% 82.53% 80.12%
Other assets 4.33% 5.66% 6.49% 5.43% 5.43% 5.43% 5.43% 5.43% 5.43% 5.43%
Total assets 173.73% 165.89% 267.01% 243.66% 236.94% 233.38% 232.47% 238.68% 242.11% 244.60%
LIABILITIES AND EQUITYLIABILITIESCurremt Liabilities
Accounts payable & other accrued liabilities 16.06% 15.95% 24.70% 20.72% 20.72% 20.72% 20.72% 20.72% 20.72% 20.72%
Current portion of borrowings 11.19% 6.38% 12.19% 9.46% 7.79% 7.14% 5.91% 7.23% 7.06% 6.86%
Deferred revenue & other current liabilities 8.28% 7.72% 6.50% 6.51% 6.51% 6.51% 6.51% 6.51% 6.51% 6.51%
Total current liabilities 35.54% 30.05% 43.39% 36.69% 35.02% 34.37% 33.14% 34.46% 34.29% 34.09%
Borrowings 34.68% 28.74% 52.48% 46.54% 44.89% 43.22% 42.25% 42.21% 41.99% 41.65%
Deferred income taxes 8.13% 5.23% 10.88% 10.37% 10.12% 9.97% 9.97% 10.24% 10.43% 10.54%
Other long-term liabilities 11.69% 11.09% 18.69% 15.94% 15.94% 15.94% 15.94% 15.94% 15.94% 15.94%
Redeemable noncontrolling interests 2.08% 1.89% 12.34% 10.81% 10.24% 9.79% 9.46% 9.35% 9.18% 8.97%
Total Liabilities 92.11% 77.00% 137.78% 120.36% 116.21% 113.30% 110.76% 112.21% 111.83% 111.19%
EquityPreferred stock
Common stock 65.74% 61.88% 74.20% 68.21% 64.05% 60.71% 58.38% 57.56% 56.23% 54.59%
Retained earnings (accumulated deficit) 131.68% 139.11% 58.49% 64.97% 72.17% 79.93% 88.70% 99.52% 109.40% 118.45%
Accumulated other comprehensive income (loss) -6.40% -5.21% -9.11% -8.34% -7.81% -7.37% -7.06% -6.96% -6.80% -6.60%
Stockholders' equity subtotal 191.03% 195.78% 123.58% 124.83% 128.42% 133.28% 140.02% 150.12% 158.83% 166.44%
Treasury stock, at cost 116.09% 113.72% 1.25% 7.84% 13.61% 18.77% 23.66% 28.91% 33.71% 38.03%
Total Disney Shareholders' equity 74.93% 82.06% 122.34% 116.99% 114.81% 114.50% 116.36% 121.20% 125.12% 128.41%
Noncontrolling interests 6.69% 6.83% 6.90% 6.32% 5.91% 5.58% 5.35% 5.27% 5.15% 5.00%
Total equity 81.62% 88.89% 129.23% 123.31% 120.72% 120.09% 121.71% 126.48% 130.27% 133.41%
Total Liabilities and equity 173.73% 165.89% 267.01% 243.66% 236.94% 233.38% 232.47% 238.68% 242.11% 244.60%
Walt Disney CompanyValue Driver Estimation
Fiscal Year Ending September 30th 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E CVNOPLAT ComputationEBITANet Sales 55,632 55,137 59,434 72,650 79,320 84,771 89,750 93,664 95,043 97,285 100,210 -Cost of services and products (29,993) (30,306) (32,726) (41,047) (44,855) (47,938) (50,754) (52,967) (53,747) (55,014) (56,669)-Selling, general, administrative & other expenses (8,754) (8,176) (8,860) (11,261) (12,295) (13,140) (13,911) (14,518) (14,732) (15,079) (15,533)-Depreciation & amortization (2,527) (2,782) (3,011) (3,007) (3,760) (3,919) (4,087) (4,258) (4,433) (4,614) (4,804)+ Implied Interest on Operating Leases 100 94 103 112 116 120 125 131 137 143 150
EBITA 14,458 13,967 14,940 17,448 18,525 19,895 21,123 22,052 22,268 22,720 23,355 Less: Adjusted Taxes:Income Taxes 5,078 4,422 1,663 3,319 3,784 4,091 4,368 4,583 4,649 4,760 4,916 + Tax Shield on Interest Expense 57 85 126 215 329 320 309 294 274 259 240 +/‐ Shield or tax on Other income ‐ (17) (132) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ + Shield for Restructuring & impairment charges 34 22 7 260 51 55 58 60 61 63 65 +/- Shield or taxes on Equity in the income (loss) of investee (204) (70) 22 23 (111) (111) (111) (111) (111) (111) (111)+ Tax Shield on Implied Lease Interest 22 21 23 25 26 26 28 29 30 32 33
Adjusted Taxes 4988 4462 1710 3842 4,079 4,381 4,651 4,856 4,903 5,003 5,143
Plus: Change in Deferred Tax LiabilitiesDeferred Income Tax Liability 3,679 4,480 3,109 7,902 8,225 8,575 8,948 9,340 9,737 10,144 10,564 Previous Year's Deferred Income Tax Liability 4,051 3,679 4,480 3,109 7,902 8,225 8,575 8,948 9,340 9,737 10,144
(372) 801 (1,371) 4,793 323 349 373 392 397 407 420
NOPLAT (EBITA‐Adj Taxes + Change in DT) 9,098 10,307 11,860 18,399 14,769 15,864 16,845 17,588 17,762 18,124 18,632
Invested Capital ComputationOperating Current Assets:
Normal Cash 2,471 2,620 2,597 2,799 3,422 3,736 3,993 4,227 4,412 4,477 4,582 Accounts Receivable 9,065 8,633 9,334 15,481 15,283 16,333 17,292 18,047 18,312 18,744 19,308 Inventory 1,390 1,373 1,392 1,649 2,459 2,628 2,782 2,903 2,946 3,016 3,106 Television costs & advances 1,208 1,278 1,314 4,597 3,538 3,781 4,003 4,178 4,239 4,339 4,470 Other current assets 244 143 159 979 756 808 856 893 906 928 955
Operating Current Assets: 14,378 14,047 14,796 25,505 25,458 27,286 28,926 30,248 30,816 31,503 32,421
Operating Current LiabilitiesAccounts payable & other accrued liabilities 9,130 8,855 9,479 17,942 16,435 17,565 18,597 19,408 19,693 20,158 20,764 Deferred revenue & other current liabilities 4,025 4,568 4,591 4,722 5,164 5,519 5,843 6,098 6,188 6,334 6,524
Operating Current Liabilities 13,155 13,423 14,070 22,664 21,600 23,084 24,440 25,506 25,881 26,492 27,288
Net Working Capital 1,223 624 726 2,841 3,858 4,202 4,486 4,742 4,934 5,012 5,133
Net PPE 27,349 28,406 29,540 31,603 32,674 33,898 35,279 36,817 38,516 40,380 42,415
LT Operating AssetsPV of Operating Leases 2,830 2,669 2,922 3,168 3,275 3,398 3,536 3,691 3,861 4,048 4,252 Intangible assets, net 6,949 6,995 6,812 23,215 22,422 21,657 20,917 20,203 19,513 18,847 18,203 Investments in DTC, net ‐ ‐ ‐ ‐ 500 969 1,358 1,680 1,948 2,171 2,355 Other LT Operating assets 2,340 2,390 3,365 4,715 4,306 4,602 4,872 5,084 5,159 5,281 5,440
Total 12,119 12,054 13,099 31,098 30,503 30,625 30,683 30,658 30,482 30,346 30,250
LT Operating LiabilitiesOther long-term liabilities 7,706 6,443 6,590 13,580 12,647 13,516 14,310 14,934 15,154 15,511 15,977 Total 7,706 6,443 6,590 13,580 12,647 13,516 14,310 14,934 15,154 15,511 15,977
Invested Capital 32,985 34,641 36,775 51,962 54,389 55,210 56,138 57,284 58,778 60,227 61,821
Value DriversNOPLAT 9,098 10,307 11,860 18,399 14,769 15,864 16,845 17,588 17,762 18,124 18,632 Ending IC 32,985 34,641 36,775 51,962 54,389 55,210 56,138 57,284 58,778 60,227 61,821
ROIC (NOPLAT / Beg. IC) 27.53% 31.25% 34.24% 50.03% 28.42% 29.17% 30.51% 31.33% 31.01% 30.83% 30.94%EP (Beg. IC * (ROIC ‐ WACC) 7,091 8,303 9,756 16,165 11,613 12,560 13,491 14,177 14,282 14,553 14,973 FCF (NOPLAT ‐ Change in IC) 9,158 8,650 9,727 3,211 12,343 15,042 15,916 16,442 16,268 16,675 17,038
Walt Disney CompanyWeighted Average Cost of Capital (WACC) Estimation
CAPM Risk free rate 1.93%
Market Risk Premium 5.44%
Beta1y 0.8742y 0.8453y 0.8954y 0.903Average of last 4 years 0.87925 0.87925
CAPM 6.7131%
Estimate Cost of Debt YTM30 y maturity 3.538% Number is from firms curve on BBMarginal Tax Rate 22.02% 30y from B
Capital StructureEquity Market Value 260,406 Debt Value 50,154 Current Portion of borrowings + BTotal 310,560
Capital Structure WeightsEquity 83.85%Debt 16.15%
Cost of Capital Estimation (WACC)Equity Component 5.629%Debt Component 0.446%WACC 6.075%
Walt Disney CompanyDiscounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
CV Growth 1.90% CV ROIC 30.94% WACC 6.07% Cost of Equity 6.71%
DCF ModelFiscal Years Ending 0.019 2020E 2021E 2022E 2023E 2024E 2025E CV 2026EFor Discounting:
Number of periods: 1 2 3 4 5 6 6WACC Discount Rate 1.061 1.125 1.194 1.266 1.343 1.425 1.425
Continuing Value
Numerator2026 NOPLAT 18,632 1‐(g/ROIC) x 94%
17,487.61 DenominatorWacc ‐ g 4.17%
DCF CV 418,911.25
Free Cash Flow 12,343 15,042 15,916 16,442 16,268 16,675 418,911 WACC discount rate 1.061 1.125 1.194 1.266 1.343 1.425 1.425PV of FCF Discounted by WACC 11,636.26 13,368.77 13,335.50 12,987.28 12,113.44 11,705.50 294,072.99
PV of Operating Assets 369,220 Plus:Excess Cash 1,996 Investment 3,224 Less:PV of Operating Leases 3,168 Borrowings 46,986 ESOPs 1,059 Noncontrolling Interest 13,975 Underfunded Pensions 2,650
Value of Equity 306,601.53
Shares Outstanding 1,800.00 Price Per Share 170.33$ Partial Year Adjustment 171.46$
EP ModelFiscal Year Ending 2020E 2021E 2022E 2023E 2024E 2025E CV 2026EContinuing Value
EP 2026 / WACC 246,495
Plus:
Numerator:2026 NOPLAT 18,632 (g/ROIC) 6.14%(ROIC ‐ WACC) 24.86%
284.49 Denominator:WACC*(WACC‐g) 0.25%
EP CV 358,684
Economic Profit 11,613 12,560 13,491 14,177 14,282 14,553 358,684 WACC discount rate 1.061 1.125 1.194 1.266 1.343 1.425 1.425PV of EP Discounted by WACC 10,947.84 11,162.37 11,303.53 11,198.31 10,635.19 10,216.28 251,793.91 Plus: Beginning IC 51,962 PV of Operating Assets 369,220
PV of Operating Assets 369,220
Plus:Excess Cash: 1,996 Investments 3,224 Less:PV of Operating Leases 3,168 Borrowings 46,986 ESOPs 1,059 Redeemable Noncontrolling Interest 13,975 Underfunded Pensions 2,650
Value of Equity 306,601.53
Shares Outstanding 1,800.00 Price Per Share 170.33$ Partial Year Adjustment 171.46$
Key Inputs:
Walt Disney CompanyDividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending 2020E 2021E 2022E 2023E 2024E 2025E CV 2026E
Key Assumptions CV growth 1.90% CV ROE 12.32% Cost of Equity 6.71%
EPS 6.16 5.97 6.47 6.89 7.08 7.35 7.69
Future Cash Flows P/E Multiple (CV Year) 17.57 EPS (CV Year) 7.69 Future Stock Price 135.12
Dividends Per Share 1.76 1.76 1.80 1.80 1.85 1.89 1.96 Future Cash Flows 1.76 1.76 1.80 1.80 1.85 1.89 135.12Discount Periods 1 2 3 4 5 6 6
Discounted Cash Flows 1.649 1.546 1.481 1.388 1.337 1.280 91.496
Intrinsic Value 100.18$ Adjusted Stock Price 100.84$
Walt Disney CompanyRelative Valuation Models
EPS EPS Est. 5yrMarket Cap (billions) 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21
DIS Walt Disney Company 260.65 $144.67 $6.16 $5.97 23.5 24.2 1.08 21.8 22.5
Media Companies P/E (EPS20) 120$ Market Cap (billions) EPS EPS Est. 5yr P/E (EPS21) 98$
Ticker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21 PEG (EPS20) 43$ CBS CBS Corp Class B 13.94 $38.57 $5.33 $6.23 7.24 6.19 1.5 4.83 4.13 PEG (EPS21) 36$ CMCSA Comcast A 200.55 $44.75 $3.38 $3.50 13.22 12.79 7.9 1.67 1.62 CHTR Charter Communications Inc 117.21 $475.60 $13.47 $20.06 35.30 23.71 1.4 25.22 16.93 FOXA Fox Corporation 21.09 $34.27 $2.30 $2.73 14.88 12.55 8.6 1.73 1.46 Media 35.72%T AT&T 286.06 $39.29 $3.67 $3.80 10.71 10.33 5.8 1.85 1.78 Parks 30.27%VIAB Viacom 9.05 $21.99 $4.13 $4.25 5.32 5.17 ‐1.3 ‐ ‐ Studio 16.34%DISCA Discovery A 14.07 $27.26 $3.91 $4.03 6.98 6.76 13.8 0.51 0.49 Streaming 17.68%
Average 13.380 11.072 5.967 4.402 ‐
Parks, Resorts, & Other Leisure ActivitiesMarket Cap (billions) EPS EPS Est. 5yr
Ticker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21SIX Six Flags Entertainment 3.69 $43.77 $2.87 $3.12 15.26 14.01 5.7 2.68 2.46 FUN Cedar Fair LP 3.122 $55.10 $3.51 $3.64 15.68 15.14 3.5 4.48 4.32 RCL Royal Carribian Cruises 24.81 $117.89 $4.31 $4.63 27.35 25.46 3.6 7.60 7.07 CHH Choice Hotels International 5.15 $92.42 $4.37 $4.70 21.15 19.66 7.5 2.82 2.62 MAR Marriot International, Inc 44.60 $135.52 $6.60 $7.07 20.54 19.17 10.2 2.01 1.88 MGM MGM Resorts International 16.09 $31.18 $1.50 $1.73 20.81 18.02 3.7 5.63 4.87
Average 20.133 18.578 4.202 3.871
Studio EntertainmentMarket Cap (billions) EPS EPS Est. 5yr
Ticker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21LGF.A Lions Gate 2.02 9.66 0.805 0.902 12.00 10.71 7.9 1.52 1.36 CMCSA Comcast A 200.55 $44.75 $3.38 $3.50 13.22 12.79 7.9 1.67 1.62 SNE Sony 75.48 62.06 3.92 4.04 15.83 15.36 0.2 79.16 76.81 *Excluded In PEG average due to abnormally high ratioCNK Cinemark Holdings 3.997 34.12 2.278 2.526 14.98 13.51 3.7 4.05 3.65
Average 14.008 13.091 2.414 2.208
Streaming/Tech CompaniesMarket Cap (billions) EPS EPS Est. 5yr
Ticker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21AMZN Amazon 861.17 1,739.49$ $39.12 $56.91 44.47 30.57 25.6 1.74 1.19 AAPL Apple 1,200.00 265.76$ $14.82 $15.76 17.93 16.86 7.2 2.49 2.34 NFLX Netflix 127.58 290.94$ $6.28 $9.26 46.33 31.42 9.3 4.96 3.36
Average 36.24 26.28 3.06 2.30
Average across all segments: 19.57 16.36 6.52 5.52
Implied Relative Value:
Weight Applied to Each Area
Walt Disney CompanyKey Management Ratios
Fiscal Years Ending 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E
Liquidity RatiosCurrent Ratio 0.81 0.94 0.89 0.86 0.99 1.14 1.31 1.47 1.63 1.79Quick Ratio 0.74 0.86 0.84 0.77 0.90 1.05 1.22 1.38 1.54 1.70Cash Ratio 0.21 0.23 0.17 0.10 0.20 0.33 0.48 0.66 0.82 0.98
Activity or Asset‐Management RatiosInventory Turnover 21.94 23.67 27.00 21.84 18.85 18.76 18.63 18.38 18.46 18.51Receivable Turnover 13.73 14.32 13.41 27.83 14.32 8.79 6.35 4.39 3.55 3.00Asset Turnover 0.58 0.60 0.37 0.41 0.42 0.43 0.43 0.42 0.41 0.41Capital Turnover ‐14.88 ‐57.42 ‐21.39 ‐18.83 ‐383.63 20.88 9.62 6.22 4.62 3.70
Financial Leverage RatiosDebt Ratio 0.26 0.21 0.24 0.23 0.22 0.22 0.21 0.21 0.20 0.20Debt‐to‐equity Ratio 0.56 0.40 0.50 0.45 0.44 0.42 0.40 0.39 0.38 0.36Interest Coverage Ratio ‐35.81 ‐25.66 ‐15.41 ‐11.49 ‐12.78 ‐14.16 ‐15.58 ‐16.97 ‐18.38 ‐20.48
Profitability RatiosGross Profit Margin 1.55 1.55 1.57 1.57 1.57 1.57 1.57 1.57 1.57 1.57Return on Assets 0.09 0.13 0.06 0.07 0.07 0.07 0.07 0.07 0.07 0.07Return on Equity 0.20 0.24 0.12 0.13 0.13 0.14 0.13 0.13 0.13 0.12
Payout Policy RatiosPayout Ratio 0.27 0.20 0.26 0.29 0.29 0.28 0.26 0.26 0.26 0.25
Ratio Definitions:Current Ratio Total Current Assets / Total Current LiabilitiesQuick Ratio Current Assets ‐ inventory / Current LiabilitiesCash Ratio Cash / Total Current Liabilities
Inventory Turnover COGS / Average InventoryReceivable Turnover Sales / Total Accounts ReceivableAsset Turnover Sales / Total AssetsCapital Turnover Sales / Working CapitalDebt Ratio Total Liabilities / Total Assets
Debt‐to‐equity Ratio Total Liabilities / Total Equity
Interest Coverage Ratio EBIT / Interest ExpenseGross Profit Margin (Sales ‐ COGS) / SalesReturn on Assets Net Income / Total Assets
Return on Equity Net Income / Total Stockholders' Equity
Payout Ratio Dividends Declared / Basic EPS
Present Value of Operating Lease Obligations (2018) Present Value of Operating Lease Obligations (2017) Present Value of Operating Lease Obligations (2016)
Operating Operating OperatingFiscal Years Ending 43738 Leases Fiscal Years Ending 43738 Leases #REF! Leases2019 681 2018 580 2017 4772020 571 2019 472 2018 3762021 470 2020 401 2019 3292022 381 2021 324 2020 2782023 261 2022 244 2021 227Thereafter 1220 Thereafter 1327 Thereafter 1419Total Minimum Payments 3584 Total Minimum Payments 3348 Total Minimum Payments 3106Less: Interest 416 Less: Interest 426 Less: Interest 437PV of Minimum Payments 3168 PV of Minimum Payments 2922 PV of Minimum Payments 2669
Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases
Pre‐Tax Cost of Debt 2.95% Pre‐Tax Cost of Debt 2.95% Pre‐Tax Cost of Debt 2.95%Number Years Implied by Year 6 Payment 4.7 Number Years Implied by Year 6 Payment 5.4 Number Years Implied by Year 6 Payment 6.3
Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment1 681 661.5 1 580 563.4 1 477 463.32 571 538.7 2 472 445.3 2 376 354.83 470 430.7 3 401 367.5 3 329 301.54 381 339.2 4 324 288.4 4 278 247.55 261 225.7 5 244 211.0 5 227 196.36 & beyond 261 972.1 6 & beyond 244 1046.0 6 & beyond 227 1105.7PV of Minimum Payments 3168.0 PV of Minimum Payments 2921.6 PV of Minimum Payments 2669.1
Forcasted end PV of Op leases 2019E 2020E 2021E 2022E 2023E 2024E 2025E CV 2026E3167.96 3275.30 3398.07 3536.42 3690.59 3860.93 4047.83 4251.79
Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares): 14Average Time to Maturity (years): 5.11Expected Annual Number of Options Exercised: 3
Current Average Strike Price: 71.07$ Cost of Equity: 6.71%Current Stock Price: $131.10
2019E 2020E 2021E 2022E 2023E 2024E 2025E CV 2026EIncrease in Shares Outstanding: 3 3 3 3 3 0Average Strike Price: 71.07$ 71.07$ 71.07$ 71.07$ 71.07$ 71.07$ Increase in Common Stock Account: 195 195 195 195 195 21 ‐ ‐
Change in Treasury Stock ‐66,681 5,314 5,314 5,314 5,314 5,314 5,314 5,314Expected Price of Repurchased Shares: 131.10$ 139.90$ 149.29$ 159.31$ 170.01$ 181.42$ 193.60$ 206.60$ Number of Shares Repurchased: (509) 38 36 33 31 29 27 26
Shares Outstanding (beginning of the year) 1,800 2,311 2,276 2,243 2,213 2,184 2,155 2,128Plus: Shares Issued Through ESOP 3 3 3 3 3 0 0 0Less: Shares Repurchased in Treasury (509) 38 36 33 31 29 27 26 Shares Outstanding (end of the year) 2,311 2,276 2,243 2,213 2,184 2,155 2,128 2,102
VALUATION OF OPTIONS GRANTED IN ESOP
Ticker Symbol DISCurrent Stock Price $144.67Risk Free Rate 1.93%Current Dividend Yield 1.36%Annualized St. Dev. of Stock Returns 23.84%
Average Average B‐S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedRange 1 3 38.13 2.80 103.14$ 309$ Range 2 3 50.74 4.20 90.04$ 270$ Range 3 3 72.94 5.20 71.02$ 213$ Range 4 5 101.92 7.00 53.36$ 267$ Total 14 71.07$ 5.11 81.69$ 1,059$
Disney Sensitivity Tables
Equity Market Risk Premium171.46$ 5.14% 5.24% 5.34% 5.44% 5.54% 5.64% 5.74%0.57925 289.85 284.00 278.35 272.90 267.63 262.55 257.620.67925 244.34 239.26 234.36 229.63 225.07 220.65 216.390.77925 209.98 205.49 201.16 196.98 192.95 189.05 185.29
Beta 0.87925 183.10 179.08 175.20 171.46 167.85 164.37 161.000.97925 161.51 157.87 154.36 150.97 147.70 144.55 141.501.07925 143.78 140.45 137.25 134.15 131.17 128.29 125.501.17925 128.96 125.90 122.95 120.10 117.36 114.71 112.14
CV Growth171.46$ 1.30% 1.50% 1.70% 1.90% 2.10% 2.30% 2.50%5.150% 200.13 209.27 219.48 230.94 243.90 258.69 275.715.450% 182.82 190.43 198.86 208.24 218.74 230.57 244.015.750% 167.84 174.26 181.30 189.08 197.72 207.35 218.17
WACC 6.050% 154.76 160.22 166.17 172.70 179.89 187.84 196.706.350% 143.24 147.92 152.99 158.52 164.58 171.23 178.576.650% 133.02 137.05 141.41 146.14 151.29 156.90 163.066.950% 123.88 127.39 131.16 135.23 139.64 144.43 149.64
Pre‐Tax Cost of Debt171.46$ 2.79% 2.89% 2.99% 3.09% 3.19% 3.29% 3.39%1.60% 161.83 161.85 161.88 161.91 161.93 161.96 161.981.70% 164.83 164.85 164.88 164.91 164.93 164.96 164.991.80% 167.97 167.99 168.02 168.05 168.08 168.10 168.13
CV Growth 1.90% 171.26 171.29 171.31 171.34 171.37 171.39 171.422.00% 174.71 174.74 174.77 174.79 174.82 174.85 174.882.10% 178.34 178.36 178.39 178.42 178.45 178.48 178.512.20% 182.15 182.18 182.21 182.24 182.26 182.29 182.32
Risk Free Rate171.46$ 1.33% 1.53% 1.73% 1.93% 2.13% 2.33% 2.53%19.02% 207.53 196.91 187.18 178.22 169.96 162.30 155.1920.02% 205.02 194.50 184.85 175.98 167.79 160.20 153.1621.02% 202.51 192.07 182.52 173.72 165.61 158.10 151.1222.02% 199.98 189.64 180.17 171.46 163.42 155.98 149.0823.02% 197.44 187.20 177.82 169.20 161.23 153.87 147.0324.02% 194.90 184.76 175.47 166.92 159.04 151.74 144.9725.02% 192.35 182.30 173.10 164.64 156.84 149.61 142.91
Disney + User Count Growth in CV year 2026171.46$ 0.70% 0.80% 0.90% 1.00% 1.30% 1.60% 1.00%1.60% 161.96 161.98 162.00 162.02 162.08 162.15 162.021.70% 164.96 164.98 165.00 165.02 165.09 165.15 165.021.80% 168.10 168.12 168.15 168.17 168.23 168.30 168.171.90% 171.39 171.42 171.44 171.46 171.53 171.60 171.462.00% 174.85 174.87 174.90 174.92 174.99 175.06 174.922.10% 178.48 178.50 178.52 178.55 178.62 178.69 178.552.20% 182.29 182.32 182.34 182.37 182.44 182.51 182.37
CV ROIC171.46$ 15.94% 20.94% 25.94% 30.94% 35.94% 40.94% 45.94%10.27% 165.88 170.86 173.93 176.00 177.50 178.63 179.5213.27% 164.36 169.35 172.42 174.49 175.99 177.12 178.0016.27% 162.85 167.84 170.90 172.98 174.47 175.60 176.4919.27% 161.34 166.32 169.39 171.46 172.96 174.09 174.9822.27% 159.82 164.81 167.88 169.95 171.45 172.58 173.4625.27% 158.31 163.30 166.36 168.44 169.93 171.06 171.9528.27% 156.80 161.78 164.85 166.92 168.42 169.55 170.43
Marginal Tax Rate
CV Growth
Receivables