Investors are examining Disney (DIS) because of its streaming services’ explosive growth.
For example, Disney Plus’s paid subscriber base grew from 116 million in the second quarter of 2021 to 118.1 million in the third quarter of 2021, Variety estimates. Hence, Disney Plus gained 2.2 million subscribers in a quarter, the slowest growth in two years. FactSet estimates analysts projected Disney Plus’s subscriber base could grow to 126.2 million in the 2nd Quarter of 2021.
Moreover, Disney (NYSE: DIS) is making less money from Disney Plus. Disney made $4.12 per Disney Plus subscriber in September 2021, down from $4.52 in September 2020.
ESPN is Growing faster than Disney
Overall, Disney reported 179 million subscribers across its three streaming platforms (Disney Plus, Hulu, and ESPN Plus) in the third quarter of 2021, Variety notes. That number grew from 174.9 million in the second quarter of 2021.
Hence, all of Disney’s streaming services gained 4.5 million subscribers in the third quarter of 2021. The biggest growth was at ESPN Plus which added 2.29 million subscribers in the third quarter of 2021. In comparison, Hulu gained one million new subscribers in the third quarter of 2021.
Thus, Hulu’s subscriber base grew from 42.8 million to 43.8 million and ESPN Plus’s subscriber base grew from 14.9 million to 17.1 million. I have to wonder if some of the new ESPN subscriber are football, hockey, and basketball fans signing up at the end of the season.
Consequently, Disney is the second largest streaming company with 179 million subscribers worldwide in October 2021, Variety estimates. The largest streaming company is Netflix (NFLX) with 213.6 million subscribers worldwide in September 2021.
Is Disney making money from streaming video?
Therefore, the Walt Disney Company (NYSE: DIS) is an excellent barometer for the profitability of streaming video.
Disney is making more money. Its quarterly gross profit rose from $4.553 billion on 30 June 2021 to $4.973 billion on 30 September 2021. Conversely, the quarterly operating income fell from $1.32 billion on 30 June 2021 to $507 million on 30 September 2021.
However, Disney is experiencing impressive revenue growth. Disney’s revenues grew by 26.33% in the quarter ending on 30 September 2021 and 44.53% in the quarter ending on 30 June 2021. The quarterly revenues grew from $4.553 billion on 30 June 2021 to $4.973 billion on 30 September 2021.
So yes, Disney is making money from streaming video and growing with the streaming market. Disney’s other businesses are also growing, revenues at the Parks Experiences, and Products Division grew by 99% to $5.4 billion in the third quarter of 2021.
How Much Cash is Disney Generating?
However, Disney (DIS) is generating more cash. For instance, the quarterly operating cash flow grew from $1.466 billion on 30 June 2021 to $2.632 billion on 30 September 2021.
However, the quarterly ending cash flow fell from $183 million on 30 June 2021 to -$112 million on 30 September 2021. In contrast, Disney’s cash and short-term investments fell from $16.073 billion on 30 June 2021 to $15.962 billion on 30 September 2021.
Thus, Disney is coming out of the pandemic with less tax and more revenue. However, Disney has taken on more debt during the pandemic. For example, the Total Debt grew from $55.838 billion on 30 June 2021 to $58.313 billion on 30 September 2021.
Consequently, Disney is paying off enormous amounts of debt. For instance, Disney’s quarterly financing cash flow fell from -$530 million on 30 June 2021 to -$1.355 billion on 30 September 2021.
Disney borrowed enormous amounts of money during the pandemic. For example, it reported quarterly financing cash flows of $5.499 billion on 31 March 2020 and $8.303 billion on 30 June 2020. Disney paid off much of that debt, it reported a quarterly financing cash flow of -$6.553 billion on 30 September 2020.
What Value Does Disney Have?
I think the Walt Disney Company (DIS) has enormous value because of its 179 million streaming video subscribers.
Plus Disney has enormous financial value. Disney had $203.609 billion in Total Assets on 30 September 2021. The Total Assets grew from $202.221 billion on 30 June 2021.
I think Mr. Market fairly priced Disney at $152.71 on 10 December 2021. That share price was lower than the $154.49 Mr. Market paid for Disney on 9 December 2021.
I consider Disney a value stock because it had a fair share price, a growing streaming business, and rising revenues. There are some drawbacks at Disney including no dividend.
However, Disney has a history of paying impressive dividends. It last paid a quarterly dividend of 88₵ on 19 January 2020 just before the COVID-19 pandemic.
If you are looking for a stock that could grow with streaming video. I think Disney is worth examining.
Originally published at https://marketmadhouse.com on December 10, 2021.
