parks and cruises will rebound beyond pre-covid levelsīest of all, the expectations for future profit growth baked into Disney’s stock price remain overly pessimistic, which means Disney is undervalued.Ĭurrent Price Implies ROIC Only Reaches 2011 Levels: I use my reverse discounted cash flow (DCF) model to quantify the expectations for Disney’s future ROIC baked into its current stock price.live content is a key differentiator in the streaming wars.In addition to its ability to monetize content and generate positive cash flows, the following characteristics position Disney for long-term profit growth: For comparison, Netflix burned -$943 million in FCF over the same time.
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In fact, Disney generated a cumulative $10.8 billion positive free cash flow (FCF) in fiscal 2020 and fiscal 2021. Why Disney Holds Strong Upside: Unmatched Ability to Create and Monetize Content: Disney not only has extensive experience in creating high-quality content and some of the most recognizable brands in the world, but it also monetizes that content through multiple cash-generating channels. Disappointed investors sent Disney shares 19% lower in the three weeks following the news on November 10, 2021. Total subscribers were 118.1 million, which was well below Wall Street expectations of 125 million. The firm added 2.1 million Disney+ subscribers in fiscal 4Q21, which was down from 12.6 million in the prior quarter. Main Reason for Underperformance: Slowing Subscriber Growth: While Disney grew its Disney+ subscribers by 60% in fiscal 2021, growth is slowing. I added Disney to my Focus List Stocks: Long Model Portfolio in November 2017, and while it underperformed the market in 2021, it still offers ample upside given that the company is poised for long-term profit growth. Underperforming Focus List Stock 1: Disney (DIS): Down 15% vs. Performance includes the performance of stocks currently in the Focus List Stocks: Long Model Portfolio, as well as those removed during the year, which is why the number of stocks in Figure 2 (45) is higher than the number of stocks currently in the Model Portfolio (39). Focus List Long 2021 Performance Table New Constructs, LLC