- March/18/2020: Still keep my limit order at $70.00. Disney is at $80.
- March/18/2020: Disney has enough cash to survive.
- March/17/2020: Management Change at Disney I’m not sure if it is a reason, but a few good data points about the revenue from different divisions.
- March/12/2020 7:08 AM: DIS at $94.36. Let’s see if it hit my target today. it doesn’t.
- Disney Land shutdown the California Adventure. Disney World also closes. Park division would get hịt
- NBA cancels the season. ESPN/Media network would have problems.
- Revise the buy target to $70.
- March/11/2020: Change the limit order from $100 to $90. It is around a 35% discount from the estimated value o $140 and 15% from the lowest value of $106 (use relative dividend yield model).
- March/9/2020: Create a buy limit order at $100.
The company has four business lines: Media Network, Parks, Studio, Direct To Consumer and International (DTCI). The revenue breaks down is on the table.
Disney is all about the customer experience. It sells experience through movies, theme parks, cruise, Disney brand merchandise. For example, it starts Star War series, then updates its theme park with Star War theme. That creates the cycles attract the customers to keep spending money on Disney products. The price power of the company has been pretty good for the last multi decades.
The risk of business model is the recession, terrorism, pandemics, media landscape change. The company is in the entertainment industry. It is a want, not a need so it gets hit during the recession. Their theme park division is also impacted by terrorism. As of March/2020, people are scared of the Coronavirus so they might cancel their Disney trip. Their media dividend needs to adapt to market change and consumers’ tastes to avoid earning problems.
In summary, I think the Disney business model is strong enough to handle the risks and deliver satisfactory results to its shareholders.
Morning Star, S&P and Value Line give Disney top scores for its financial strength and sustainable competitive advantage.
|MorningStar Moat Rating||Wide|
|Value Line Safety||1|
|Value Line Finance Strength||A++|
I use the relative dividend yield to value the stock. The current dividend of Disney is $1.92. The average yield for the last 17 years is 1.1% and the highest yield in the same time frame is 1.8%. It leads to the value from $106 to $174. Morning Star uses the discounted cash flow to come up with a fair value of $141.
|Current Dividend = $1.92||Yield||Estimated Value|
|Average of 17 year||1.1%||1.92/1.1% =$174.00|
|Highest Yield (2015)||1.8%||1.92/1.8%= $106.00|
|MorningStar Fair Value||$141.00|
The closing price of Disney on March/5/2020 is $113.98. It is near the low end of the estimated value.