Will Disney Continue to Make Investors Happy?

With shares of The Walt Disney Company (NYSE:DIS) trading at around $65.57, is DIS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Disney owns 80 percent of ESPN, and ESPN is the most profitable of all Disney properties. Therefore, ESPN is very important. It’s available in over 100 million American homes, which is approximately 1/3 of the population. ESPN is cutting 300 to 400 jobs, and it’s losing a small Denver office. Disney has stated that this has been done for cost management purposes. In related news, ESPN has acquired the rights to U.S. Open Tennis, and it’s beginning a new channel for SEC Football.

It should be noted that 150 employees were laid off at Lucasfilm last month. Perhaps Disney is anticipating revenue problems and doing what it can to make sure the bottom line impresses. CEO Robert Iger stated that he’s “relatively optimistic” for the remainder of the year. That sounds like a wise choice of words for someone who is unsure of how the remainder of the year will pan out while also not wanting to frighten investors. As far as leadership goes, Bob Iger is a winner. According to Glassdoor.com, 90 percent of employees approve of him.

Disney beat expectations last quarter. And Iron Man 3 has been a big success. It’s currently rated 7.7 on IMDb.com and 78 percent on RottenTomatoes.com. These are high numbers, especially for IMDb. This adds value to the Iron Man franchise.

In regards to theme parks, New Fantasyland has been a big hit at Disney World. This has attracted more visitors. Thanks to higher costs, spending within Disney parks has also increased. However, looking ahead, it will be challenging for Disney to maintain these high prices.

Sometimes online activity can act as a clue for demand. According to Alexa.com, online traffic for Disney.com has seen a slight decline over the past year. Over the past three months, pageviews-per-user has declined 9.18 percent, time-on-site has declined 9 percent, and the bounce rate has increased 13 percent.

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The chart below compares fundamentals for Disney, News Corp. (NASDAQ:NWS), and Time Warner Inc. (NYSE:TWX).

Trailing P/E 19.86 13.34 18.43
Forward P/E 16.64 17.18 14.04
Profit Margin 13.64% 16.68% 11.00%
ROE 15.43% 19.56% 10.56%
Operating Cash Flow 7.72B 3.83B 3.76B
Dividend Yield 1.10% 0.50% 1.90%
Short Position 2.20% 1.00% 1.30%


Let’s take a look at some more important numbers prior to forming an opinion on this stock.