Disney Stock Analysis: Ads, Park

Our takeaways for Disney Stock Analysis 2022, begin with the pros:

  1. Sticky customer, kids watch Disney again and again. Come to its park every holiday.
  2. Theme Park shows significant improvement. We believe this year it will achieve its pre-COVID performance. Another good news is Disney keeps enhancing its places. Elaborate later.
  3. Though till now Disney+ still burning cash to run its business, the ad-supported content will be the game changer (unlike Netflix). Disney’s content is specific, family-friendly, and targeted. It is good for a third party to access Disney viewers. We will elaborate on this later.
  4. Disney stock price is at COVID level (July 2022)


  1. Disney runs an expensive business that needs a high amount of capital. Theme Park requires massive investment, even their digital content needs regular reinforcement like the Fox acquisition in 2017. Unfortunately, Disney’s balance sheet isn’t as spectacular as its magical story to handle all of that needs easily.
  2. Management fails our expectations. Under though situation – the COVID – they prioritize themselves and leave shareholders.
  3. Lack of tailwind. The key driver for growth is increasing Disneyland ticket or subscriber fees. Reaching more people is more difficult. Disney is simply not a fast grower company.

Ok, now going to the elaboration section. You can skip this post if you don’t want to go into further detail.

Oh, don’t worry – we keep this post updated regularly.

Elaborate Pros 1: The Paralyzed Customer.
The sticky customer emphasizes the competitive advantage of Disney.

This section actually does not need an explanation.

Your daughter watches Elsa every year – singing let it go. The characters paralyze us. Disney easily remakes its collection and monetizes. Don’t forget that since its opening in 1955, Disney has raised Disneyland ticket prices to more than 50 times the initial value.

But, we still come. We still keep watching its movies.

Elaborate Pros 2: The Magic Kingdom.
Overview of Theme Park Segment in Disney Stock Analysis 2022.

The reason why The Theme Park, Experiences, and Products (TPEP) matters is that it delivers almost 50% of operating income.

The TPEP segment finally gets a sign of life after the bleak days under pandemics.

To remind you of that cold days…

In fiscal year(1) 2019, TPEP delivers 26.7 Billion in revenue but only translate about 7.4 Billion as operating income. Under the virus attack in 2020 – when all the hope was abandoned and the magic kingdom was no longer the happiest place in the world anymore – revenue dipped 40% to 17 Billion and translated more catastrophically into operating income: a 90% drop to 455 million.

In the fiscal year 2021 (1) – when the world finds its hope through vaccines -, The Magic Kingdom still can’t make the investor smile. The operating income for TPEP is 471 million, only slightly better than in 2020. The vaccine effect has not yet materialized.

In the fiscal year 2022, it seems that the game has changed. From Jan to March 2022, Disney TPEP delivers 1.7 Billion in operating income – a positive number that far exceeds the same period for 2021 with 406 million as a loss.

And what makes us happier is…this trend won’t be over.

We believe that this segment could deliver more return since Disney are on the way to building more project to deliver more experience in its theme park, like the following:

  1. Cosmic Rewinds from the Guardian of the Galaxy franchise
  2. Avenger Campus

Elaborate Cons 1: Expensive Material to Present the Magic
Another perspective from competitive advantage for Disney Stock Analysis.

Theme Park and magical content are a deadly combo. You and your kids see Disney characters and mystical space in the movie – some kind of fantasy. But, then you see them also in the real world. This combo makes a great user experience. This competitive advantage is almost impenetrable.

But it doesn’t come easily.

You can’t pull that theme park from the thin air with magic.

It is an expensive business.

You need massive installment to build that magical representation in the real world. It needs world-class design, labor, creativity, and technology – simply, it requires a high amount of money. This characteristic set a high bar for a new entry, protecting the market share, but at the same time, forcing the company to spend more. A business with this style requires a good balance sheet.

Disney does not represent it. In the last 10 years, the debt is widening from 10 billion in 2011 to more than 48 Billion in 2021. On normal days, high leverage is ok, but when something happens – like let’s say, pandemics – the company could be in a difficult situation.

This characteristic is not only true for a theme park but also for the media segment. In 2017, Disney acquired Fox for jawboning 71 Billion and requires three years to complete the acquisition.

Elaborate Pros 2: The Streamer
Specific content, specific ads, specific target

When everyone at home due to government restrictions as a response to viruses, we think that the streaming business will be shine. Everyone has plenty of time and flexibility. Disney’s report for the fiscal year 2020 said otherwise.

It records a negative 2.9 Billion operating income(2).

In the fiscal year 2021, the negative is narrowing to 1.6 Billion.

The streaming business is not good as we expect. Don’t we?

How about 2022?

In the period of Jan to March, the streaming segment recorded minus 887 million as operating income, worse than the same period for 2021 with minus 290 million. All of these stats make us – maybe also you – question Disney’s target for break even in 2024.

And this is why the conversation about ads-supported content begins.

Could Ads Aid?

This new hybrid plan allows subscribers to submit the cheaper plan with a few interrupting ads. This will boost the number of subscribers (due to the lower price) and at the same time will generate more income through the ads.

And what makes us optimistic about Disney ads in its streaming services is its specific content. It is high-quality and family oriented – unlike Netflix. Also, it could boost its TPEP segment. This ecosystem makes Disney stand out from the other streaming provider.

And don’t forget its branding strength. Disney could make spin-offs and spin-offs from its main franchise. The Mandalorian, Wanda Vision, Hawkeye, etc and etc – will enrich the Disney library and attract more consumers.

But still, we need a better number than this.

  1. Ok, this also confirms our hypothesis that Disney runs an expensive business.

Elaborate Cons 2: Management overview
Why does management analysis come after a competitive advantage discussion?

In 2020, Disney stopped its dividend program, blaming pandemics that drag its theme park business. In 2021, Disney said the same tone. In 2022, Disney tells investors that the policy to not pay dividends is to ignite growth for Disney.

Something that we don’t see. Yet.

The problem is, that Bob Chapek – the CEO – received 32.5 million compensation for the fiscal year 2021, more than double what he got in 2020.

So, when shareholders got nothing, the CEO exploited the company. This is one serious consideration not buying Disney stock. But as always, you choose.

Final Word of Disney Stock Analysis 2022:
The Mix and difficult choice

So…what do we have?

Disney has a magical business advantage due to its brand, perfectly executed through the franchise and theme park. But it lacks growth opportunity, so – so management. At the current price, Disney is not a good long-term investment – but it is a good speculative stock.