Disney Stock: Fair Price & UNRIVALED?

Disney stock is down over 40% in the last year and investors are wondering if DIS has lost its magic. I think the recent decline in Disney stock is more a function of broader market turbulence (S&P 500 is down nearly 20%) than an erosion in Disney's key assets.

Disney still owns UNRIVALED theme parks (e.g. Disneyland), content (e.g. Avengers, Frozen), and channels for distribution (e.g. Disney+, ESPN, & ABC). 

The ultimate test if an asset is truly "UNRIVALED" is an ability to raise prices and that's exactly what they've historically done. What was once a $1 ticket for Disneyland in 1955, will now cost a family of 4 over $1,000! A taste of the magical kingdom has never been so expensive, and yet, 10 years from now, I'll bet the prices will be higher! LINK

Disney has also grown and adapted to the times. In November 2019, they launched Disney+, their Direct-to-Consumer streaming option. Since then Disney+ has grown to over 137 million paid subscribers worldwide.  This is astonishing.  For context, Netflix crossed 100 million subscribers in April 2017, nearly 6 years after it first began reporting streaming subscribers. LINK

While Disney+ has been a significant cost center so far, I strongly suspect that it will hit management's profitability targets in the next few years and will have very juicy margins longer-term. In short, if you'll want to watch exclusive Disney content, you'll need to pay up. 

While Disney stock is down 40% in the last year, I would not count it out. 5 to 10 years from now, it wouldn't surprise me to see them have more users, greater content, and of course, higher prices.  For more discussion on Disney's valuation and core segment contributions, see the following video: LINK

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