Hindsight Portfolio Management BASIC INFORMATION
Ticker: DIS Stock Price: $131.97 Market Cap: $237.78B
2 COMPANY OVERVIEW
Industry: Entertainment Media Networks, Movies, Stores, Theme Parks and Resorts, and Cruises
3 BACKGROUND 4 HISTORY
Start of the Walt Disney Snow White and the Seven Company, originally known as the Dwarfs- Disney’s first feature- Disney Brothers Cartoon Studio. length animated film is released.
1928 1940
Walt Disney issues its Steamboat Willie – the first first stock & moves to animated film to star Mickey Burbank, CA. Mouse and feature sound debuts.
5 HISTORY
The first Disney live action film (Treasure Island) and TV show Walt Disney World air (One Hour in Wonderland) opens in Florida.
1955 1982
Disneyland opens in EPCOT Center California. (now Epcot) opens.
6 HISTORY
The first international Disney theme park- Tokyo The first Disney Store Disneyland opens. opens.
1983 1996
Disney Channel begins Merger with broadcasting. Capital Cities/ABC.
7 HISTORY
Robert A. Iger named Disney acquires CEO of Disney. Marvel Entertainment.
2006 2012
Disney purchases Pixar Disney completes Animation Studios. acquisition of Lucas Films.
8 HISTORY
Star Wars: The Force Disney completes st Awakens is released acquisition of 21 Century Fox.
2016 2019
Shanghai Resort Disney+ streaming opens. service release.
9 MANAGEMENT- CEO
Began his career at ABC in 1974. He joined Disney in 1996. Notable acquisitions: Pixar 2006, Marvel 2009, Lucas Film 2012, in 2016 Disney opened their first theme park and resort in China, and in 2019 the 21 Century Fox acquisition. Mr. Iger plans to retire by 2021.
10 MANAGEMENT- CFO
McCarthy began working at Disney in 2000, and she became CFO in 2015. Prior to Disney, she worked in Imperial Bancorp from 1981-2000. In 1997 she was the CFO of Bancorp.
11 MANAGEMENT- DTC CHAIRMAN
Mr. Mayer first joined Disney in 1993; he then he went off and became the CEO of Clear Channel Interactive where he managed all new media businesses, distribution, sales, content and new technology development. He rejoined Disney in 2005.
12 MANAGEMENT- ESPN PRESIDENT
Joined Disney in 2010 as the Co-President of Disney Interactive. He became the president of ESPN in 2018. Prior to Disney he worked in Yahoo.
13 MANAGEMENT- TV CHAIRMAN
Mr. Rice began his career in the marketing department of 21 Century Fox; in 2010 he was Chairman for 2 years in FNG and served as President of 21 Century Fox and CEO of FOX Networks Group.
14 MANAGEMENT- CHAIRMAN OF PARKS
Chapek has led both Walt Disney Parks and Resorts and Consumer Products for over 20 years. Prior to joining Disney, Mr. Chapek worked in brand management for HJ Heinz Company and in advertising for J. Walter Thompson.
15 MANAGEMENT- NEW CEO?
Kevin Bob Mayer Chapek
16 SEGMENTS & GEOGRAPHY 17 GEOGRAPHY
18 SEGMENTS
Theme Parks & Studio Consumer Products & Media Networks Resorts Entertainment Interactive Media 41% 34% 17% 8%
19 MEDIA NETWORKS
20 THEME PARKS & RESORTS
21 STUDIO ENTERTAINMENT
22 DTC & INTERNATIONAL
23 CONSUMER PRODUCTS
24 INTERACTIVE MEDIA
25 MERGERS & ACQUISITIONS
26 M&A- 21ST CENTURY FOX $71.3B purchase Incurred $19B of additional debt & 19B of cash Fox Corp still exists independent from DIS Access to Fantastic Four, The Simpsons, Titanic, Home Alone, Grey’s Anatomy
27 M&A- 21st CENTURY FOX
FOX Studios produces 70% of the prime-time slate on FOX. Total of Six Studios Marvel, Pixar, Lucas film, Disney Animation, Disney Live Action, and 20th Century Fox. DIS now owns twelve of the top twenty films of worldwide office grosses.
28 RECENT NEWS
29 UPCOMING RELEASES
30 GROWTH OPPORTUNITIES 31 GROWTH OPPORTUNITIES
32 REVENUE GROWTH
PARKS +10%
+5% MEDIA
0% 2014 2015 2016 2017 2018
33 REVENUE GROWTH
34 GROWTH OPPORTUNITIES
35 GROWTH OPPORTUNITIES
36 GALAXY EDGE
3% attendance decline Higher ticket prices Spending per capita was up 10% Blocking annual pass holders to decrease wait times
37 DISNEY CRUISES
38 DISNEY+
39 DISNEY+
Disney+ Exclusives Over 60 Million Subscribers by 2024
40 RISK FACTORS
Changes in public and consumer taste Changes in technology and consumer consumption patterns Increased competitive pressures Increased cost in pensions
41 COMPETITORS & THEIR METRICS 42 WHO OWNS WHAT?
43 WHO OWNS WHAT?
44 APPLE TV+
Launching today! $5/month Apple is giving away free year- long subscriptions for purchases of certain hardware (like the new iPhone) New shows like The Morning Show with Jennifer Aniston, Reese Witherspoon, & Steve Carell
45 PEACOCK
Launching in April 2020 $5-7/month Comcast will give away the service to its 21million paid TV subscribers The Office, Saturday Night Live, and 30 Rock, plus NBCUniversal movies like Shrek, Knocked Up, and Meet the Parents
46 HBO MAX
Launching in May 2020 $15/month Offering free subscription for current HBO subscribers From Warner Media Shows like Friends, The Big Bang Theory, & South Park
47 NETFLIX
Started the streaming trend Currently has rights to lots of other shows that it will lose Creating new original content (Spending $15B) $9-16/month
48 OTHER COMPETITORS
49 QUALITATIVE ANALYSIS
Criteria Yes/No Competitive Advantage? Yes Easily Explainable? Yes Heavily Unionized? Yes Heavy Capital Infusion? Yes Heavy R & D? No Obsolete Inventory? No Chronic One-Time Write Offs? No Able to raise prices to offset inflation? Yes Sell more in the future? Yes
Billion Dollar Competition? No 50 QUANTITATIVE ANALYSIS LTM Value Threshold Pass/Fail Gross Profit Margin 44.94% Above 20% Pass SGA to Gross Profit 35.68% Below 80% Pass R&D to Gross Profit 0.00% Below 10% Pass Depreciation 11.27% Below 10% Fail Interest to Operating Income 3.87% Below 15% Pass Net Profit Margin 21.20% Above 10% Pass Current Ratio 0.94 Above 1 Fail Obligation Ratio 2.17 Below 5 Pass Adjusted Debt to SE 0.43 Below 0.8 Pass ROE 25.80% Above 15% Pass ROC 19.60% Above 15% Pass Payout Ratio 20% Below 60% Pass Preferred Stock None None Pass Capital Expenditures 7.51% Below 25% Pass Net Earnings Trend Increasing Increasing Pass Retained Earnings Trend Increasing Increasing Pass Total 87.5% 14 51 FINANCIAL ANALYSIS 52 Revenue Upward Trend
70,000 64,776 65,000 59,434 60,000 55,63255,137 55,000 52,465
50,000 48,813 45,041 45,000 42,278 40,893 40,000 37,843 38,063 35,510 36,149 35,000
30,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
53 Net Income Upward Trend
14,000 12,598 12,322 12,000
9,391 10,000 8,980 8,382 8,000 7,501 6,136 5,682 6,000 4,807 4,687 4,427 3,963 4,000 3,307
2,000
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
54 FCF Upward Trend
12,000.0
9,830.0 10,000.0 8,720.0 8,363.0
8,000.0 7,120.0 6,656.0 6,469.0 6,000.0 4,468.0 4,182.0 3,855.0 3,868.0 4,000.0 3,566.0 3,435.0 3,351.0
2,000.0
0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
55 EPS Upward Trend
9.0 8.4 7.9 8.0
7.0 5.7 6.0 5.7 4.9 5.0 4.3 4.0 3.4 3.1 2.5 3.0 2.3 2.3 2.0 1.8 2.0
1.0
0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
56 Gross Margin Above 20%
50.0 45.9 45.9 46.1 44.5 44.4 45.0 44.9 45.0 40.9 40.0
35.0
30.0
25.0
19.1 19.7 19.0 20.0 17.7 15.8 15.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
57 Operating Margin Above 20%*
28.0 25.8 26.0 25.2 25.2 25.0 23.6 24.0
22.0 21.0 21.0 19.7 19.5 20.0 19.1 19.0 17.7 18.0 15.8 16.0
14.0
12.0
10.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
58 Net Margin Above 10%
25.0 21.2
20.0 19.0 16.9 16.3 15.4 16.0 15.0 13.2 13.4 13.6 11.7 11.8 10.4 10.0 9.2
5.0
0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
59 FCF Margin Above 10%*
18.0 16.5 15.8 16.0 14.8 15.0
14.0 13.3 13.6
11.7 12.0 10.9 10.2 9.9 9.9 10.0 8.4 8.0
6.0 5.2
4.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
60 SG&A Below 80%
46.0%
44.0% 42.3% 41.8% 42.0%
40.0% 38.2% 38.4% 38.0%
36.0% 35.4% 34.1% 34.0% 32.9% 33.2%
32.0%
30.0% 2012 2013 2014 2015 2016 2017 2018 2019
61 Depreciation Below 10%*
35.0%
30.0% 28.6% 25.5% 25.0% 23.7% 22.0% 21.3% 20.0%
15.0% 13.8% 11.0% 11.2% 11.3% 10.6% 10.2% 9.8% 9.9% 10.0%
5.0%
0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
62 Capital Expenditures Below 25%
50.0% 45.7% 45.0% 40.0% 35.0% 30.8% 31.4% 30.0% 25.0% 23.1% 21.2% 20.1% 18.6% 18.0% 20.0% 17.7% 16.7% 14.0% 14.8% 14.6% 15.0% 10.0% 5.0% 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
63 Interest Expense Below 15%
15.0%
12.0% 10.3%
9.0% 8.1% 7.0% 6.8% 5.6% 6.0% 5.3% 4.6% 3.7% 3.7% 2.5% 2.5% 3.0% 2.0%
0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
64 Debt to Equity Below 80%
80%
70% 64% 61% 60%
50% 50% 46% 47% 43% 39% 40% 38% 38% 37% 34% 32% 33% 30%
20% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
65 Current Ratio Above 1
1.50
1.40 1.33 1.30 1.21 1.20 1.14 1.14 1.11 1.07 1.10 1.03 0.99 1.01 1.01 1.00 0.94 0.90 0.81 0.80 0.70 0.70
0.60 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
66 Shares Outstanding Declining Trend*
2200 2092 2100
2000 1948 1948 1909 1875 1900 1818 1813 1814 1800 1759 1709 1700 1639 1578 1600 1507 1500
1400
1300 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
67 LT Debt Downward Trend
40000 36311 35000
30000
25000 19119 20000 16483 17084 15000 12776 12631 12773 11892 11495 11110 10130 10922 10697 10000
5000
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
68 Return on Equity Above 15%
30 28
25 21 21 20 19 19 17 15 14 15 14 15 13 11 10 10
5
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
69 Adjusted ROE Above 15%
30.0% 25.8% 25.0% 21.7% 21.7%
20.0% 18.8% 16.7% 15.2% 13.6% 14.3% 15.0% 13.7% 12.9% 13.5% 10.6% 10.8% 9.6% 9.8% 9.6% 13.5% 8.7% 9.1% 8.5% 10.0% 8.1% 7.3% 8.0% 7.7% 5.9% 6.5% 5.0%
0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Adjusted ROE with Treasury Stock ROE
70 Return on Capital Above 15%
25.0%
20.0% 19.1%
15.7% 14.6% 14.9% 15.0% 13.0% 11.3% 11.0% 10.5% 10.2% 10.0% 9.7% 10.0% 8.3% 7.3%
5.0%
0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
71 Revenue Breakdown by Segment
$25,000
$20,000
$15,000
$10,000
$5,000
$- 2010 2011 2012 2013 2014 2015 2016 2017 2018 Media Networks Parks and Resorts Studio Entertainment Consumer Products & Interactive Media
72 Operating Margin by Segment
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Media Networks Parks and Resorts Studio Entertainment Consumer Products & Interactive Media
73 DuPont Analysis
250.0%
200.0%
150.0%
100.0%
50.0%
0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net Margin TAT FLM
74 DuPont Analysis
2014 2015 2016 2017 2018
Net Profit Margin 0.15 0.16 0.17 0.16 0.21
Total Asset Turnover 0.58 0.59 0.60 0.58 0.60 Financial Leverage 1.87 1.98 2.13 2.32 2.02 Multiplier
Return on Equity 16.68% 18.83% 21.71% 21.74% 25.83%
75 OBLIGATION RATIO
Long-Term Debt: $37.803B
+ Leases * 7: $4.767B
+ Pension: $1.78B
- Cash: $10.108B
/ Net Profit: $15.8B
= Obligation Ratio: 2.17 years
76 MOAT 77 MOAT
Media Networks Iconic Characters Theme Parks Intangible Assets Brand Names “The happiest place on Earth!”
78 MOAT
79 VALUE BANDS
80 DCF- BASE CASE Earnings Per Share $7.38 Growth Rate in the Next 10 years 11% Terminal Growth Rate 4% Years of Terminal Growth 10 Discount Rate 10% Fair Value $137.71 Margin of Safety 5.89%
81 DCF- BULL CASE Earnings Per Share $7.38 Growth Rate in the Next 10 years 15% Terminal Growth Rate 4% Years of Terminal Growth 10 Discount Rate 10% Fair Value $180.66 Margin of Safety 28.26%
82 DCF- BEAR CASE
Earnings Per Share $7.38 Growth Rate in the Next 10 years 6.50% Terminal Growth Rate 4% Years of Terminal Growth 10 Discount Rate 10% Fair Value $101.79 Margin of Safety -27.32%
83 INTRAPORTFOLIO: ROE
120%
90%
60%
30%
0% MA OMC BF.B ROST NKE QCOM CHRW MSFT ORCL ULTA TSCO PII UNP CNI DG NXPI DIS TIF GOOG UHAL BRK.B GNW Series1 126.08 54.16% 53.53% 49.68% 47.91% 46.92% 43.42% 42.69% 41.32% 37.80% 36.61% 34.33% 31.95% 25.13% 25.08% 19.62% 18.92% 18.07% 17.76% 10.21% 7.87% 1.22% 84 INTRAPORTFOLIO: ROIC
250%
200%
150%
100%
50%
0% QCO MA SBUX MSFT NKE ROST HD GOOG ORCL ULTA CHRW OMC BF.B TSCO CNI NXPI TIF UNP DG PII UHAL DIS BRK.B M Series1 239.76 97.72%96.83%46.76%46.56%44.86%42.76%37.01%32.46%31.38%26.96%25.83%23.44%17.12%15.91%15.60%15.53%15.50%13.87%13.78%10.14% 9.72% 9.16%
85 INTRAPORTFOLIO: PRICE/BOOK
60
50
40
30
20
10
0 GNW BRK.B UHAL DIS NXPI GOOG CNI TIF DG PII CHRW UNP OMC ULTA TSCO ORCL MSFT ROST NKE QCOM BF.B MA Series1 0.15 1.37 2.07 2.6 3.6 4.5 4.61 4.73 6.21 6.25 6.36 6.54 6.89 7.64 7.79 10.13 10.52 12.11 15.66 18.03 18.73 57.06
86 INTRAPORTFOLIO: PRICE/EARNINGS
45
40
35
30
25
20
15
10
5
0 OMC GNW CHRW DIS BRK.B NXPI ORCL CNI UNP PII ULTA TSCO UHAL HD ROST DG TIF GOOG MSFT QCOM SBUX NKE BF.B MA Series1 13.03 14.63 15.49 16.37 17.19 17.36 17.88 19.14 19.79 19.94 20.40 21.27 21.57 23.53 25.08 25.93 27.00 27.03 27.24 28.88 29.86 33.66 37.94 42.71
87 INTRAPORTFOLIO: PRICE/SALES
20
18
16
14
12
10
8
6
4
2
0 GNW CHRW PII OMC DG TSCO BRK.B HD ROST TIF ULTA NXPI NKE DIS QCOM SBUX UHAL GOOG ORCL UNP CNI BF.B MSFT MA Series1 0.22 0.73 0.82 1.17 1.32 1.35 2.00 2.17 2.52 2.62 2.95 3.18 3.41 3.44 3.79 4.07 4.18 4.36 4.71 5.27 5.70 7.93 8.29 17.42 88 INTRAPORTFOLIO: PRICE/FCF 60
50
40
30
20
10
0 UHAL GNW NXPI SBUX OMC CHRW ORCL QCOM ULTA PII TSCO BRK.B UNP HD ROST DG MSFT GOOG NKE CNI MA BF.B DIS TIF Series1 0 1.2 10.27 10.57 11.05 12.25 15.68 20.12 20.74 20.9 22.54 22.68 23.68 23.81 24.52 27.79 28.96 31.32 36.97 38.77 48.07 49.75 51.22 51.65
89 INTRAPORTFOLIO: EV TO EBIT
40
35
30
25
20
15
10
5
0 OMC CHRW BRK.B ORCL NXPI QCOM UHAL CNI UNP PII DIS ULTA HD GOOG TSCO ROST MSFT TIF SBUX DG NKE BF.B MA Series1 9.84 12.16 12.62 13.98 14.57 14.71 15.56 15.63 16.06 16.38 17.2 17.54 18.4 19.52 19.64 19.98 21.36 22.37 22.83 24.06 28.91 29.24 33.66
90 INTRAPORTFOLIO: EV TO EBITDA
35
30
25
20
15
10
5
0 UHAL NXPI OMC BRK.B CHRW PII ORCL QCOM CNI UNP ULTA DIS GOOG TSCO HD TIF MSFT ROST SBUX DG NKE BF.B MA Series1 8.02 8.24 8.87 10.12 11.04 11.13 11.59 12.14 12.6 12.87 13.29 14.16 15.25 15.59 16.16 16.81 17.22 17.24 17.49 19.73 25.29 27.48 31.88
91 CONCIOUS INVESTOR
9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 9/17 9/18 EPS 1.76 2.03 2.52 3.13 3.38 4.26 4.90 5.73 5.69 8.36 ($) SPS 19.45 19.90 22.03 23.49 25.02 28.71 31.08 34.62 36.76 39.62 ($)
HGROWTH STAEGR 17.90% 95.04% 8.84% 98.14%
92 CONCIOUS INVESTOR
9/13 9/14 9/15 9/16 9/17 9/18
EPS ($) 3.38 4.26 4.90 5.73 5.69 8.36
SPS ($) 25.02 28.71 31.08 34.62 36.76 39.62
HGROWTH STAEGR 17.35% 94.86% 9.35% 98.54%
93 CONCIOUS INVESTOR
9/16 9/17 9/18 EPS ($) 5.73 5.69 8.36 SPS($) 34.62 36.76 39.62
HGROWTH STAEGR 20.79% 91.87% 6.99% 99.83%
94 CONCIOUS INVESTOR- SAFETY
Price EPSttm P/E Ratio HGrowth Payout STRETD Default $ 129.60 $ 7.53 17.12 16.12 % 25.80 % 15.43 % Safety $ 129.60 $ 7.53 14.51 11.79 % 18.90 % 9.51 %
-15.25% -26.86% -26.74% -38.37%
95 CONCIOUS INVESTOR- KILL IT
Price EPSttm P/E Ratio HGrowth Payout STRETD Default $ 129.60 $ 7.53 17.12 16.12 % 25.80 % 15.43 % Safety $ 129.60 $ 7.53 13.59 2.39 % 0.00 % 0.00 %
-20.62% -85.17% -100.00% -100.00%
96 RECOMMENDATION 97 WHAT DOES BUY! BUY! MICKEY BUY! MOUSE RECOMMEND?
98 RECOMMENDATION
We recommend a limit order for DIS 80 shares at $125-$128
99 QUESTIONS? 100