Behind the Mouse: Exploring Disney’s Stock Price Phenomenon with Mickey
What do accountants think?
As always, let’s start with the financials. The balance sheet of Disney reveals a strong financial position. By comparing the total current assets to the current liabilities, the ratio is slightly above 1%, specifically at 1.001. This indicates that Disney can immediately pay off its short-term debt, which is a positive sign. A strong balance sheet instils confidence in investors and contributes to a higher stock price.
Examining the income statement, we calculate the net profit margin by dividing the operating income by the total revenue and multiplying it by 100. For Disney, this calculation yields a net profit margin of 7.79%. This figure falls below the desired benchmark of 15%. It indicates that the company’s operating income as a percentage of total revenue is relatively lower. A lower net profit margin can raise investor concerns, potentially limiting the stock price growth.
Analysing the cash flow figures for Disney, we observe fluctuations over the years. 2019 the company reported a cash flow of $1,730,000, which increased significantly to $3,596,000 in 2020. However, in 2021, the cash flow dropped to $1,989,000 and declined to $1,067,000 in 2022. The trailing twelve months (TTM) figure is $94,000, indicating a relatively low cash flow. This could raise concerns, especially if the company is paying dividends, as it may impact Disney’s ability to sustain dividend payments or invest in growth opportunities. A lower cash flow can potentially harm the stock price.
Based on the financial information provided, Disney demonstrates strength in its balance sheet with a favourable ratio of total current assets to total current liabilities. However, the net profit margin falls below the desired benchmark, indicating room for improvement in terms of profitability. The cash flow figures also exhibit fluctuations, with the TTM figure being relatively low. These factors may have a mixed impact on the stock price, with the positive balance sheet offsetting some concerns about profitability and cash flow.
Balance Sheet:
Total Current Assets / Total Current Liabilities = Answer should be above 1%, meaning it pays off its short-term debt immediately
$29,098,000 / $29,073,000 = 1%
Income Statement:
(Operating income / Total revenue) x 100 = Should be above 15%. This tells you the company’s net profit margin.
($6,567,000 / $84,415,000) x 100 = 7.78%
Cashflow:
Companies should have increased cashflow, especially if they are paying dividends.
29/09/2019 $1,730,000
29/09/2020 $3,596,000
29/09/2021 $1,989,000
29/09/2022 $1,067,000
TTM $94,000
Who leads the powerhouse company?
Moving onto Walt Disney’s leadership team. Robert A. Iger’s return as CEO in November 2022 has brought a seasoned leader back. During his previous 15-year tenure, Iger successfully transformed Disney into one of the world’s largest media companies. His strategic vision and leadership were instrumental in acquiring renowned entertainment companies like Pixar, Marvel, Lucasfilm, and 21st Century Fox. Under Iger’s guidance, Disney achieved remarkable milestones, including the successful launch of Disney+ and ESPN+. These streaming platforms have become major revenue generators for the company, driving subscriber growth and expanding Disney’s global footprint. With a proven track record of growth and innovation, Iger’s leadership could inspire investor confidence and impact the stock price positively.
Asad Ayaz holds the position of Chief Brand Officer at The Walt Disney Company, overseeing global brand management and marketing campaigns. Ayaz’s expertise lies in guiding the company’s digital and social strategy, setting franchise priorities, and leading international consumer research and analytics. His marketing leadership has been evident in the successful promotion of blockbuster films like “Star Wars: The Force Awakens,” “Black Panther,” and hit series like “The Mandalorian” and “WandaVision.” Ayaz’s ability to engage consumers, strengthen brand value, and drive revenue growth could positively impact investor sentiment and the stock price.
Alan Bergman serves as the Co-Chairman of Disney Entertainment, overseeing Disney’s global entertainment media and content businesses worldwide, including the company’s streaming services. Bergman’s leadership has been instrumental in integrating major acquisitions, such as Pixar, Marvel, Lucasfilm, and Fox, into Disney’s operations. Bergman’s strategic approach has contributed to Disney’s global box office dominance, with record-breaking films like “Avengers: Endgame” and “Avatar” grossing over $2 billion each. His ability to manage operations, drive content creation, and maximize revenue potential in the streaming era positions him as a critical driver of Disney’s future success. Bergman’s leadership could instil investor confidence and impact the stock price positively.
David L. Bowdich oversees global security functions as The Walt Disney Company’s Chief Security Officer. Bowdich’s extensive experience in security, crisis management, and investigations, gained during his 25-year career at the FBI, brings a wealth of expertise to Disney. He protects Disney’s parks, resorts, cruise lines, stores, productions, employees, guests, and intellectual property. Bowdich’s experience as the former Deputy Director of the FBI and his background in managing investigations and crises enhance Disney’s security framework, mitigating potential risks and safeguarding the company’s operations and assets. Under Bowdich’s leadership, such a vital security infrastructure could positively impact investor confidence and the stock price.
Would you work for Disney?
Next, let’s discuss whether you would work for Disney. The workplace culture data provided can have potential implications for the stock price of The Walt Disney Company. Factors to consider include employee satisfaction and retention, talent attraction and recruitment, CEO approval and business outlook, and employee feedback.
The overall rating of 3.9/5 suggests a relatively positive work environment, which investors may view favourably. Positive employee experiences, such as HR offering unique benefits and focusing on teamwork, can contribute to higher employee satisfaction and retention. This positive work environment may positively impact investor perception. Favourable ratings in areas like culture, diversity, and career opportunities indicate a positive perception of Disney as an employer. A strong employer brand and positive workplace culture can help attract top talent, which is crucial for long-term success. The ability to recruit skilled employees positively impacts investor perception.
The high CEO approval rating (72%) and the belief in a positive business outlook (61%) among employees reflect confidence in the company’s leadership and future prospects. Positive sentiments towards the CEO and an optimistic business outlook may instil investor confidence and influence stock prices. Employee positive and negative feedback provides insights into the strengths and weaknesses of the workplace culture. Positive aspects such as HR benefits, teamwork, and work-life balance contribute to a positive work environment. However, concerns related to low pay, management issues, and challenging guest interactions may affect employee morale and potentially impact productivity or employee turnover. A positive workplace culture, high employee satisfaction, and favourable reviews can enhance the company’s reputation, attract talent, and foster a positive work environment. This can contribute to long-term success and potentially impact investor perception and stock prices.
Reason for the rise and falls
Now let’s move onto the reason Disney can fluctuate in stock price. Referring to the reasons for rises and falls, it is evident that a significant portion of Disney’s stock price increases can be attributed to the success of popular movies produced by the company. Disney has a proven track record of delivering blockbuster films that capture the attention of audiences worldwide. These movies, such as the Marvel Cinematic Universe films, Star Wars franchise, and animated features, have consistently generated substantial revenue and contributed to Disney’s stock price growth. Furthermore, Disney’s strategic acquisitions have also played a significant role in the company’s stock price fluctuations. Over the years, Disney has made notable acquisitions, including Pixar, Marvel, Lucasfilm, and 21st Century Fox. These acquisitions have expanded Disney’s portfolio of intellectual properties, content libraries, and distribution channels, strengthening its position in the entertainment industry. The impact of these acquisitions on Disney’s stock price can be observed in positive and negative fluctuations. Positive news of successful integration, synergies, and revenue growth resulting from these acquisitions has often led to increases in the stock price.
On the other hand, challenges or uncertainties surrounding the integration process, financial performance, or market reception of the acquired entities can cause temporary declines in the stock price. It is important to note that while movies and acquisitions have been significant factors, other elements, such as market trends, economic conditions, and investor sentiment, also influence Disney’s stock price. Therefore, investors and analysts closely monitor the performance of Disney’s movies and acquisitions and broader industry dynamics and financial indicators to assess the potential impact on the company’s stock price.
Disclaimer:
The opinions expressed in this document are those of the author. The author is not an accountant or financial advisor and information contained in this document is not a substitute for financial advice from a professional. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances. All information and content in this document are for general informational purposes only. This article uses affiliate links. If you use these affiliate links, I may earn an affiliate commission.
