Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

FREE EBOOK

How to Day Trade Stocks & Indices

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy.

Updates

Disney’s share price: is Disney+ worth the cost?

Disney's [DIS] share price is up a hefty 24% this year. Driving growth are profits from its resorts and huge box office receipts from its blockbuster movies. Only last month Avengers: Endgame became the highest-grossing movie of all time, finally sinking Titanic.

But the house of mouse's ambition to jump on the streaming bandwagon with Disney+, is already eating into profits.

 

 

What is Disney+?

Disney+ is the magic kingdom’s answer to Netflix [NFLX]. As a new streaming service, it will cost $7 a month or $70 a year. Content will come from Disney classics, the Marvel universe - much to the chagrin of Netflix who lost its deal to stream the latest exploits of Captain America - and Star Wars. Original content will include spin-offs for fan favourite Marvel and Star Wars characters, including an Obi-Wan Kenobi series starring Ewan McGregor.

 

When’s Disney+ coming?

Disney announced that they’ll launch Disney+ in Canada, the Netherlands and US on 12 November, followed by Australia and New Zealand. Shares were up 1.3% on the news at the start of last week, but have since dipped to pre-announcement levels.

 

Why should investors care?

While Q3 saw revenues grow 33%, total costs were up 55%, much of it down to money spent getting Disney+ ready for launch. Once the streaming service comes online, analysts will be keen to see how Disney manages to convince subscribers to part with their money every month. 

33%

Disney's Q3 revenue growth

  

What challenges does Disney+ face?

Apple [AAPL] has announced it is spending $6 billion on original content for its new streaming service. The kicker for Disney is that Apple TV will launch just weeks before Disney+, potentially stealing much of its thunder. 

Disney has the advantage of its enviable back catalogue and some of the biggest franchises on the planet. Also, its service is $2 cheaper than Apple’s. But according to the FT, Apple has increased its spend on content from $1 billion to $6 billion and is finding willing partners in Hollywood. 

Then there is Netflix. While the streaming giant’s subscriber numbers have fallen this year, it is still the number one player in the market. It’s also upped its spending on original content to a massive $13 billion.

$6billion

Amount Disney is spending on original content compared with Netflix's $13 billion

  

What else to watch out for?


Sandra Kuba, an ex-financial analyst at Disney, has filed a series of whistleblower tips with the Securities and Exchange Commission.

Talking to MarketWatch, Kuba alleges that Disney has been overstating revenue for years. The filing alleges that during 2008-09 Disney could have overstated annual revenue by as much as $6 billion.

Allegations focus on employees in the parks-and-resorts business exploiting weaknesses in Disney's accounting software. Examples include recording revenue for $500 gift cards when guests only paid the discounted $395.

Disney has said the claims are without merit.

 

How do Disney's financials look?

Disney saw its net income margin jump from 18% in 2017 to 22% in 2018. Yet, analysts expect this to drop to 16% in 2019. Weighing on margins are restructuring charges and a lack of asset sales this year. The cost of Disney+ is another drain.

Expectations are that revenues will grow 17% to $69.7 billion in 2019. However, Disney is looking at declining profits combined with a 60% debt-to-equity ratio. This means the company will need to make good on this growth potential to sustain high earnings per share.

 

Market cap$242.484bn
PE ratio (TTM)17.33
EPS (TTM)7.77
Quarterly Revenue Growth (YoY)32.90%

Disney share price vitals, Yahoo Finance, 27 August 2019

 

Is Disney a buy?

Over the past 12 months, the company has a price-to-earnings multiple of 17.33. Yet its forward PE comes in at 22.82, indicating that the stock is about to become more expensive. Worryingly, Disney's forecasted PEG over the next 5 years is -9.35. 

Among analysts, the average price target for DIS shares is 152.26. This would represent a 13% upside if hit. Credit Suisse also upgraded the stock from “Neutral” to “Outperform” at the start of August. We’ll have to wait until November to see if Disney+ was really worth the cost.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

Join the 40,000+ subscribers getting market-moving news every week.

Written by

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles

7 Interviews with the world's best traders

Learn about the techniques and strategies used by expert traders

Get it now