Disney’s 100 Year Plan = Monster Returns?
Theme parks are open, cruises are sailing, movie theaters are back in business, and the COVID-19 pandemic is seemingly in the rearview mirror. So, is now the perfect time to buy the battered Disney stock (DIS)?
Walt Disney is one of the most recognizable names in the entertainment industry, and the company Walt and his brother Roy Disney founded in 1923 is now worth an astounding $335 billion.
Even though the Walt Disney Company’s traditional business model was built around its theme parks, movies, and merchandise, it has been diversifying recently by adding business segments, such as its ESPN and ABC networks.
With so many divisions under the corporate umbrella, what does the future of Disney look like? Is the stock overpriced or undervalued?
Here’s why Disney may be primed for a big run in the coming years and why now could be the time to buy Disney stock, especially considering its century-long vision.
Investing in Disney
The Walt Disney Company has done exceptionally well for most investors (pandemics and recessions aside); it has been profitable for years while boasting a durable economic moat.
The company has a long history of paying dividends to shareholders, with payouts of $2.9 billion in 2019, the last payout before the COVID-19 pandemic forced it to pause dividends. In addition, Disney has strong financials, with a 26% increase in revenue year over year.
Although the current price of Disney stock is 50% lower than its all-time high, some recent news has left savvy investors optimistic about what is to come.
Disney’s 100-year plan
At the D23 Expo, fans were given new and exciting information about Disney’s 100 Years of Wonder celebration.
During the event, Disney announced some incredible plans for the next 100 years, which will excite not just shareholders but also customers.
Some notable announcements at D23 included upcoming musicals, park and resort experiences, products, games, merchandise, the expansion of digital experiences, and, most importantly, the focus on the streaming industry.
Expansion of streaming services
One of the most exciting elements of Disney’s 100-year plan is the expansion of its streaming services. While most people think of Disney streaming services exclusively as Disney+, the company also owns Hulu and ESPN.
The combination of these three streaming services makes up 221 million subscribers, more than its main competitor Netflix. Note that these numbers reference current subscribers and do not consider future growth.
One of the most significant opportunities for Disney comes from ESPN and its hold on the world of sports streaming. With streaming services fighting for viewers, sports are becoming the next big thing. Amazon, Peacock, Paramount+, Apple, and Warner Brothers Discovery have all poured money into new sports programming.
Disney’s sports brand, ESPN, already has 22.8 million paid subscribers and could quickly increase that number with the right content. Happily, this considerable growth opportunity for Disney is already very much on its radar.
Disney has identified sports streaming as a key growth area and is investing accordingly. The company announced plans to launch a new ESPN+ service in Australia and New Zealand, which will be the first time ESPN+ is available outside the United States. Disney also gained the rights to the 2026 Superbowl, its first in 20 years, and is continually expanding its sports rights portfolio.
Benefits of keeping ESPN at Disney
While ESPN could make a strong case for remaining its own company due to its strong branding, there are many benefits to keeping it at Disney. Here are just a few benefits for Disney with ESPN in its portfolio.
- ESPN’s cash flow can help fund other Disney projects. The fact that ESPN is a cash cow allows Disney to pour money into other areas, such as theme parks, movies, and streaming content.
- Cross-promotion between ESPN and other Disney brands. An example of this is when a new sports movie comes out, ESPN can promote it on its channels, giving the movie free advertising. Other companies, however, would have to pay for this promotion.
- The ability to bundle ESPN with other Disney streaming services. Bundling is a great way to get people to subscribe to multiple Disney streaming services. For example, you could bundle ESPN+ with Hulu, which would appeal to many people interested in sports and television content.
Is Disney stock set to soar?
Disney has already shown it is willing to invest in ESPN and its future, an excellent sign for shareholders who want to see the company grow in the coming years. The bottom line is that Disney’s stock could soar in the coming years thanks to the streaming focus combined with strong brands, cash flow, and cross-promotion abilities.
With ESPN+ already prominent in the sports streaming industry, Disney is well positioned to combine its other streaming services and become a dominant force. Disney shares could be an excellent investment option if you’re looking for a company with solid growth potential and a proven track record.
