In the last couple of years, Walt Disney Co (DIS) has tasted success with almost every movie release.
Despite the fabulous run of its movies, the company’s shares have declined 1.1% so far this year, against the Zacks categorized Media Conglomerates industry’s gain of 9.3%.
On the contrary, the year 2016 is turning out to be an eventful for Comcast Corporation (CMCSA) and Time Warner Inc (TWX), whose shares have surged 23.8% and 46.6%, respectively, year to date.
What is Holding DIS Stock Back?
For some time now, declining subscriber count and higher programming costs have been a cause of concern for investors. Disney’s primary cash cow, ESPN, has been under immense pressure as the pay-TV landscape continues to change owing to migration of subscribers to online TV. Falling subscriptions will have a telling effect on the network’s ad revenues. In the fourth-quarter fiscal 2016, ESPN’s ratings were impacted by change in time of bowl games.
ESPN has been losing subscribers on a regular basis. It lost nearly 3 million subscribers over the past one year as the number of cord cutters continues to increase. At the end of the fourth quarter of fiscal 2016, ESPN had a subscriber base of nearly 89 million in comparison to 92 million at the end of the prior-year quarter.
However, Disney is striving to bring back ESPN’s golden days. In an effort to attract online viewers, the company has inked a deal with video streaming, data analytics as well as commerce management company BAMTech. Further, the company has the option to acquire majority of the stake in BAMTech, in future. It said that it will use BAMTech to create an ESPN-branded, over-the-top video streaming service that will cover a variety of sports.
Further, Disney is putting a lot of effort to make its content accessible to more customers. The company stated that AT&T Inc.’s (T) DirecTV will feature channels like ESPN, ESPN2, ABC, Freeform, Disney Channel, Disney XD as well as Disney Junior in their subscription packages in the upcoming DirecTV Now OTT service.
Hold on to DIS Stock
Definitely, Disney’s reviving strategy to save ESPN is commendable. Disney has a well documented history of box office success. Luck seems to be favoring the company as it has struck gold with almost every movie released over the last couple of years. In 2015, it came up with hits like Avengers: Age of Ultron, Marvel’s Ant-Man, Inside Out, Cinderella and Star Wars: The Force Awakens.
The year 2016 has also been magnificent for the company’s movie business. The notable movie releases were Captain America: Civil War, Finding Dory and Zootopia, which surpassed $1 billion at the box office.
Further, Jungle Book saw excellent business with a worldwide collection of $966 million. Further, the company’s latest release Rogue One: A Star Wars Story has made a great start in the domestic market, with the film earning $155 million on its opening weekend in the U.S and Canada.
We believe that the studio will continue with its success story beyond “Star Wars” and Zootopia as it boasts of an impressive lineup of big budget movies up to 2017.
Further, Disney has outlined the release dates for its upcoming movies. Cars 3 will be released on Jun 16, 2017 while the release of Toy Story 4 has been delayed and is now anticipated to release on Jun 21, 2019. Captain Marvel — previously scheduled to release on Nov 2, 2018 — will hit theaters on Mar 8, 2019.
Zacks Rank & Stock to Consider
Disney currently carries a Zacks Rank #3 (Hold). A better-ranked stock worth considering in the sector includes The Liberty Media Group (LMCA), which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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