Disney Attractively Priced for Long-Term Investors

We are maintaining our wide moat rating and our fair value estimate of $134. With shares trading in the four-star range, the stock may offer an attractive entry point for investors with a longer-term investment horizon.

Revenue fell 3% over last year to $14.8 billion, as park resorts (up 6%) was the only segment with year-over-year revenue growth. EBITDA declined 3% to $4.4 billion, in line with our estimate, as the 2% decline at media networks and over 17% decreases at both the studio and the consumer segments more than offset the 15% growth at parks and resorts. The decline at media networks was due to increased sports rights costs at ESPN, foreign exchange impact, and the timing of the college football playoff games. However, affiliate fee growth remains strong at 4% despite worries about the decline in pay television subscribers.

The improvement at park and resorts was driven by the Shanghai resort and improved cost controls which offset inflation and wage increases. Shanghai has already served over 7 million guests with more than 10 million expected by the one-year anniversary this summer. Management announced that the Avatar land at Animal Kingdom will open on May 27 and that Stars Wars Lands in L.A. and Orlando will open in 2019.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.