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Why to Invest in Disney
Team 2
Background History
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Founded in October 1923 by Walt Disney and Roy Disney
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Established itself as a leader in the American animation
industry before diversifying into live-action film production,
television, and theme parks.
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Worth $74.9 billion as of 2015
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Current CEO: Robert A. Iger
Current Financial Information
Ticker Symbol: DIS - listed on the NYSE
Industry: Broadcasting & Cable TV
2015 4th Quarter Report
Share Price: $114
EPS: 4.90
Market Cap: $194.8 B
Beta: 0.9
Dividend Yield: 1.14%
Revenues for the year increased 7% to a record $52.5 billion.
Net income for the year increased 12% to a record $8.4 billion.
EPS for the year increased 15% to a record $4.90.
“In Fiscal 2015 we delivered the highest revenue, net income and
adjusted EPS in the Company’s history.” - Robert A. Iger
Reasons to Invest
Recent Acquisitions: Marvel Studios (2009) and LucasFilm (2013)
MARVEL: Disney stock was $26 just before the company acquired Marvel; it is now over $100.
Last year alone, Disney’s earnings climbed by more than 22% over the previous year, which is a
huge increase for a company of Disney’s size.
DISNEY: Analysts forecasting a $2 billion worldwide box office for “The Force Awakens,” of which
$800 million to $1 billion should be captured by Disney.
Reasons to Invest
“Fiscal 2015 marked Disney's fifth straight year of record performance, and we are pleased to raise our
dividend by 19% on an annualized basis.” -Robert A. Iger
As of December 2, Disney raised their dividends for shareholders from $0.66/share to
$0.76/share.
Disney (DIS) ended fiscal year 2015 with a 7% gain in revenue from 2014
Of Disney's $52 billion in revenue, over 44% comes from Media Networks, by far its largest
contributor. Parks and Resorts come in second at just over 30%, while studio entertainment
operates a distant third at 14%. Diversification leaves ample room for profit.
Compare and Contrast
Apple Financial Information
CEO: Tim Cook
Ticker Symbol: APPL - listed on the NASDAQ
Industry: Technology, Communications Equipment
Summary
Apple has larger market cap, and their higher EPS
indicates higher profitability than Disney.
However, Apple has a higher beta, indicating higher
investment risk
Share Price: $116
EPS: 9.22
Market Cap: $654.2 B
Beta: 1.1
Dividend Yield: 1.77%
5 Year Market Share Changes
Disney
-steadily increasing
-safer to invest
Apple
-lack of consistency
-risky
Potential Apple Pitfalls
Increased Competition
Apple has real smartphone competition- smartphone market is saturated with other competitors-Samsung, HTC, LG, Windows
Apple needs to attract 40 million to 50 million net new iPhones users a year, a difficult margin in a saturated market. The stock’s
performance is highly correlated to iPhone sales and a slowdown in shipments would make it hard for the stock to work.
Loss of Key Management
Loss of Steve Jobs affecting company innovation and creativity
Risk and Overvaluation
Analysts warn Apple’s stock fall to the mid-$80’s if the risks play out. At the same time, even if risks melt away, the upside to the stock is $130
to $140. That’s not a good trade, the analysts say.
“We believe its (Apple’s) earnings multiple, which is toward the upper end of its recent trading range, has limited upside whereas out-year
estimates could be at risk.” - USA Today