by Daniel Shvartsman
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Disney (DIS) is a blue-chip company with a great history. It has an exciting future. And in the present, a lot of market participants are eager to pounce on it, off nearly 40% from 52-week highs and with a nearly 50% peak to trough drop behind it.
Everybody likes to point out “Mr. Market’s” famous mood swings, but there’s usually some reasoning behind those swings. And in Disney’s case, Akram’s Razor and I, both generally bullish on the company (I am still long, Akram’s Razor owned it for a trade from trough to its initial bounce), could come up with several:
- Theme parks and cruise lines shut down and travel unlikely to recover fully until 2022
- Live sports off the air ruins ESPN’s advertising and may accelerate cord-cutting
- Consumer products are harder to buy when retail stores are shut
- We may never return to the box office – are consumers really going to want more screen time once lockdowns end?
And on the flipside, Disney+ is getting a big tailwind from the work/entertain from home environment, along with Hulu. Can that balance all these headwinds? We should also mention that Disney has a much more levered balance sheet after the Fox acquisition – which, you can’t really blame them, but man what timing – and that beloved and longtime CEO Bob Iger stepped down from that role six weeks ago.
How does it all shake out? We try to work out the bear case and what might be the hidden upside for Disney. Click play above to listen.
- 2:30 minute mark – The Corona bear ETF
- 7:30 – The flywheel is stuck
- 12:30 – Long-term effect on consumer behavior in travel
- 17:00 – The significance of Bob Chapek’s theme parks experience
- 25:00 – Cruise lines and international flags
- 28:00 – Whither (wither?) the box office?
- 36:00 – Box Office as marketing
- 41:00 – ESPN – the wild card
- 56:00 – Disney+ – the ace in the hole?
- 1:01:00 – The next WFH play
- 1:09:00 – The diversionary business model in a diversionless world
See also Innovative Industrial Properties: Potential Pitfalls To This Play On Pot on seekingalpha.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.