Editor’s Note: This article was updated on Aug. 6, 2019, to correct a statistic.
As Walt Disney (NYSE:DIS) prepares to report earnings Aug. 6 it has become, in its own way, almost as valuable as Apple (NASDAQ:AAPL).
With a market cap of $249 billion, Disney stock sells for about four times last year’s sales of $59 billion. Walt Disney stock sells at almost 15.5 times earnings, with a dividend of 44 cents per share yielding 1.24%.
Apple, with a market cap of $873 billion, sells for a little over three times last year’s revenue of $259 billion. It sells at 16.5 times earnings, with a dividend of 77 cents per share yielding 1.6%.
So far in 2019 Disney stock has outperformed Apple, a gain of 28% against Apple’s 23.7%.
Which would you rather have?
The Case for Disney Stock
Disney is due to report earnings after the market closes Aug. 6, with $1.71 per share on $21.44 billion in revenue expected. Last year’s numbers were $1.91 per share of earnings but just $15.2 billion in revenue.
Disney dominates the movie and theme park markets. With its acquisition of Fox’s movie assets now complete, Disney now has 38% of the box office, more than twice Comcast’s (NASDAQ:CMCSA) NBC Universal, which has just 14%. Eight of the 10 best-attended theme parks in the world belong to Disney.
Last quarter’s disappointing results from Netflix (NASDAQ:NFLX), which had its first loss of U.S. subscribers and could suffer more as studios like Disney pull their content, has analysts believing in Disney’s Disney+ offering. It will launch November 12 at $7 per month, almost half what Netflix costs.
The Case Against Walt Disney Stock
Disney+ needs to be a hit, because TV revenue has flattened out. Broadcast and cable TV still represent more than one-third of Disney’s revenue, and were over half its earnings in the last quarter.
The transition is underway, and if the experience of ESPN is any indication, it is going to be painful.
Disney hopes to replace the $9 per month it gets from cable operators for ESPN with ESPN+, which currently costs $5 per month. That service passed 2 million subscribers in February, helped by a $1.5 billion investment in the Ultimate Fighting Championship (UFC).
Disney used to list revenue from toys, games and videogames in its earnings report, but now reports that with the theme parks as “parks, experiences and products.” Disney said its games business showed a gain last quarter from the sale of rights to Kingdom Hearts II. The lack of a game studio has long been a weakness for the company.
Trouble in China?
Apple shares have been weak lately because of the China trade war, but Disney stock price is vulnerable there as well. Disneyland has two theme parks in China, both 57% owned by government entities.
Disney is also facing increasing competition at the Chinese box office from titles like “Ne Zha,” now forecast to out-earn even “Avengers: Endgame” in that market. Disney takes the China market seriously and recently launched its reboot of “The Lion King” in China a week ahead of its U.S. premiere.
The Bottom Line on Walt Disney Stock
Disney continues to execute its pirouette away from cable and broadcast toward streaming, to the cheers of analysts everywhere. Most rate Disney stock as a buy.
But Disney is doing all this without a net. It has just $10 billion in cash and lists almost $38 billion in borrowings on its balance sheet, thanks to the Fox acquisition. One-third of its $214 billion in assets is listed as “goodwill.”
If you’re still comparing the two, Apple has about $245 billion in cash. Still prefer Disney?
Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL.
