5 reasons to buy Disney stock — 2019 Price Target
This will be quick and big-picture.
*This thesis operates under the assumption that no macro events spur a major bear market that indiscriminately beats down valuations in every industry.
- Theme parks.
This division just prints money. It seems to improve its printing skills every year too. This is their backbone.
2. Hulu, hulu, hulu (and the various other streaming platforms they talk about)
Hulu is the nightmare that should start waking the Netflix bulls up at night. Netflix is an incredible company — they caught a massive industry asleep at the wheel and they are not going anywhere. But, the 800 pounds gorillas are finally awake, and Hulu is now an incredible platform, and their numbers are making that clear.
In a sense, computers are just like TVs with respect to media consumption (for people with the $). Netflix and Hulu are just two great channels.
Also, nobody knows how this market will mature, but I’m sure Comcast and Time Warner/AT&T will continue on as minority owns and provide content. There may be licensing obligations that disallow them from cleanly separating from Hulu, but even if that weren’t the case, Hulu will have all of Fox and Disney’s content and significant penetration — the minority holders would have to think long and hard before disaffiliating from Hulu.
3. Box office
YTD, Disney earned 33% of all box office ticket sales in the US. Fox took almost 11% market share.
After Disney merges with Fox, they will, if you project the current YTD results forward, hold 45% market share in the box office — I won’t even get into the synergistic potential they could realize through cost savings, new content (e.g., Deadpool), or who knows what.
4. Sports, sports, sports, and sports (ESPN)
Most financials journalists like to talk about ESPN as if it’s going to burn through all of Disney’s cash and then some (exaggeration, but the negative sentiment is there).
ESPN has more exclusive streaming contracts than The Avengers has ticket sales. Currently, I can stream just about any game I want via reddit — but I don’t know how long of a lifespan these free channels will have.
I’ve put the least thought into this point so I will quit while I’m maybe still ahead. But, I’m confident they will figure out a good way to monetize it — maybe not as properly as before, but that’s out of their control. I will say that I if ESPN were bundled with Hulu, I would pay extra for Hulu and never think about Netflix again (I’m a male in my early twenties).
5. The news (live streaming (i.e. Hulu, Hulu, Hulu_V2))
The new Disney+Fox giant makes Hulu the only one-stop shop destination for news channels — or, the Walmart of news channels.
Netflix beat Disney and the entire industry to market by a mile. But Disney has an unmatched media armamentarium and its foot in the door. Disney will dominate digital media while its theme parks continue to print money faster than the Reichsbank in 1922.
Yes, this could’ve been more comprehensive. Yes, maybe I could’ve conflated some sections, and yeah there are probably a few loose ends. But, I don’t have enough journalistic integrity to go back and make edits.
2019 Price Target: $200
