VALUATION HIGHLIGHTS

1. Experiences constitutes 53% of the Trefis price estimate for Disney's stock.
2. Entertainment constitutes 24% of the Trefis price estimate for Disney's stock.
3. Sports constitute 23% of the Trefis price estimate for Disney's stock.

WHAT HAS CHANGED?

1. Disney's Q1 Fiscal 2023 Earnings

Disney posted a better-than-expected set of Q1 FY'24 results. While revenue remained roughly flat year-over-year at $23.5 billion, earnings rose to $1.04 per share from $0.70 per share in the year-ago quarter. While the company was impacted by continued subscriber losses at its Disney+ operations, this was partly offset by strength in the parks, experiences, and products division.

Note:FY'23 ended on September 30, 2023. Q1 FY'24 ended on December 30, 2023

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

The drivers mentioned below are some of the most important and sensitive drivers of Disney's value.

• Experiences Revenue: Disney's Experiences revenues rose from $28.1 billion in FY'22 to about $32.55 billion in FY'23, as attendance and average visitor spending at the company's U.S and international parks soared. Trefis expects the metric to grow to about $45 billion by 2030. However, if sales only grow to about $38 billion, there could be a 10% downside to our price estimate.

For additional details, select a driver above or a division from the interactive Trefis split for Disney at the top of the page.

BUSINESS SUMMARY

Disney is a diversified media company and makes money through several businesses, including cable networks, broadcasting networks, theme parks & hotels, filmed entertainment, and consumer products. The company has also added a direct-to-consumer business to its portfolio recently.

Its cable networks include ESPN, the Disney Channel, ABC Family, and others. Disney's broadcasting arm, ABC Network, is one of the biggest broadcasting networks in the U.S., with a wide viewership.

Besides TV networks, Disney boasts several theme parks and resorts that attract millions of visitors every year. Furthermore, the company leverages its famous characters and brands to sell various merchandise. Its filmed entertainment unit produces and distributes movies under the Disney Studios brand.

SOURCES OF VALUE

We believe that Disney's Experiences business is its most valuable business, given its high revenue base and stronger growth, particularly post the Covid-19 era.

KEY TRENDS

Disney's pivot to streaming

Disney has doubled down on the streaming space with the launch of its Disney+ offering in late 2019. While competition in the streaming market is intense, Disney's deep library of legacy content and popular franchises such as Star Wars and Marvel could give it an edge over rivals. Disney is also investing heavily in content specific to its streaming businesses. Although the streaming business is loss-making currently, it could provide Disney with recurring profits in the future as it builds scale.

Increasing Pay TV Competition

Increasing competition among pay-TV providers, such as Comcast, Time Warner, DirecTV, AT&T, and Verizon, is favorable for media companies, including Disney, which can gain negotiating power in discussions regarding the pricing of subscription fees for their programming content.

Increasing Sports Programming Costs

ESPN increases its fee per subscriber every year, owing to a rise in sports programming costs which have become a cause of worry for pay-TV service providers. Some of them are considering dropping ESPN from lower-priced programming packages.

Online Licensing & Broadcast Advertising

With the growth of online streaming companies such as Netflix that monetize older content primarily, licensing opportunities have expanded for media companies. However, given a decline in traditional television viewership, ratings are hit hard, resulting in lower advertising revenues for most media companies. So far, licensing revenue growth has not been able to offset the declines seen on the advertising front completely. Having said that, broadcasting networks such as FOX, CBS, NBC, and ABC have been able to contain the advertising decline due to their exposure to sports programming, which garners very high viewership and better ad pricing.