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Will Disney (DIS) Bow to Investor Pressure to Scrap Dividend?
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Disney (DIS - Free Report) is having a horrific year, courtesy of the coronavirus-led disruption that has affected its Studio Entertainment, Theme Parks, cruise and advertising business.
The pandemic affected Disney’s segmental operating income by $3 billion net of cost mitigations in third-quarter fiscal 2020. Moreover, the company had to raise a significant amount of debt to remain afloat and was compelled to suspend dividend payment in the first half of fiscal 2020.
Disney is now facing investor pressure to scrap dividend permanently. Per a Yahoo Finance report, Third Point LLC CEO Daniel Loeb recently wrote a letter to Disney CEO Bob Chapek, demanding permanent suspension of annual dividend worth $3 billion.
Daniel Loeb is well known as an activist investor. Notably, Third Point currently holds 5.5 million shares of Disney, which makes it the hedge fund’s largest equity-holding company.
Markedly, Disney shares are down 15% against the S&P 500 composite’s gain of 4.5% year to date.
Undoubtedly, Disney+ has been the major driver for Disney in recent times. Hence, the demand for increased investment on the platform is prudent.
Notably, Disney projects licensed-content expenses related to Disney+ to increase from less than $1.5 billion for fiscal 2020 to mid-$2-billion range by fiscal 2024. Furthermore, Disney will spend $1 billion in cash on original programming for Disney+ in fiscal 2020. Spending on Disney+ originals is likely to flare up to around $2.5 billion by fiscal 2024.
Moreover, the company expects Disney+ to achieve profitability not before fiscal 2024, which is expected to keep margins under pressure.
Nevertheless, momentum in subscriber-addition rate is noteworthy. Per Disney’s initial expectations, Disney+’s global subscriber base was anticipated to reach between 60 million and 90 million by the end of fiscal 2024. However, based on the current coronavirus-driven momentum, Disney+ is expected to surpass the lower end in 2020. As of Aug 3, Disney+’s subscriber base had already surpassed 60.5 million.
The streaming service has been benefiting from Disney’s bundle offering that comprises of ESPN and Hulu. Moreover, solid content portfolio has been a game changer.
Mulan’s success undoubtedly strengthens Disney+’s competitive position in the global video-streaming market, currently dominated by Netflix (NFLX - Free Report) . Moreover, streaming competition has intensified with the launch of Comcast’s (CMCSA - Free Report) division NBCUniversal’s ad-supported streaming service Peacock and Apple’s (AAPL - Free Report) strengthening Apple TV+ content lineup.
Further, Disney is expected to benefit from the wide range of movies lined up for 2021 including Black Widow starring Scarlett Johansson, Legend of the Ten Rings and Shang Chi, Marvel’s first film with an Asian lead.
Moreover, apart from a compelling content portfolio, introduction of features like GroupWatch that connects friends and families to watch movies and shows from the entire Disney+ library, even when apart, is a key catalyst.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Will Disney (DIS) Bow to Investor Pressure to Scrap Dividend?
Disney (DIS - Free Report) is having a horrific year, courtesy of the coronavirus-led disruption that has affected its Studio Entertainment, Theme Parks, cruise and advertising business.
The pandemic affected Disney’s segmental operating income by $3 billion net of cost mitigations in third-quarter fiscal 2020. Moreover, the company had to raise a significant amount of debt to remain afloat and was compelled to suspend dividend payment in the first half of fiscal 2020.
Disney is now facing investor pressure to scrap dividend permanently. Per a Yahoo Finance report, Third Point LLC CEO Daniel Loeb recently wrote a letter to Disney CEO Bob Chapek, demanding permanent suspension of annual dividend worth $3 billion.
He also urged this Zacks Rank #3 (Hold) company to invest the dividend money on accelerating Disney+’s momentum through content production and acquisition. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Daniel Loeb is well known as an activist investor. Notably, Third Point currently holds 5.5 million shares of Disney, which makes it the hedge fund’s largest equity-holding company.
Markedly, Disney shares are down 15% against the S&P 500 composite’s gain of 4.5% year to date.
The Walt Disney Company Price and Consensus
The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote
Disney+ Momentum to Aid Disney’s Prospects
Undoubtedly, Disney+ has been the major driver for Disney in recent times. Hence, the demand for increased investment on the platform is prudent.
Notably, Disney projects licensed-content expenses related to Disney+ to increase from less than $1.5 billion for fiscal 2020 to mid-$2-billion range by fiscal 2024. Furthermore, Disney will spend $1 billion in cash on original programming for Disney+ in fiscal 2020. Spending on Disney+ originals is likely to flare up to around $2.5 billion by fiscal 2024.
Moreover, the company expects Disney+ to achieve profitability not before fiscal 2024, which is expected to keep margins under pressure.
Nevertheless, momentum in subscriber-addition rate is noteworthy. Per Disney’s initial expectations, Disney+’s global subscriber base was anticipated to reach between 60 million and 90 million by the end of fiscal 2024. However, based on the current coronavirus-driven momentum, Disney+ is expected to surpass the lower end in 2020. As of Aug 3, Disney+’s subscriber base had already surpassed 60.5 million.
The streaming service has been benefiting from Disney’s bundle offering that comprises of ESPN and Hulu. Moreover, solid content portfolio has been a game changer.
Markedly, according to Sensor Tower, downloads of the Disney+ app spiked 68% from Sep 4 through Sep 6 from the prior-weekend levels, with the launch of Mulan. Moreover, consumer spending on Disney+ also spiked 193% over the same period.
Mulan’s success undoubtedly strengthens Disney+’s competitive position in the global video-streaming market, currently dominated by Netflix (NFLX - Free Report) . Moreover, streaming competition has intensified with the launch of Comcast’s (CMCSA - Free Report) division NBCUniversal’s ad-supported streaming service Peacock and Apple’s (AAPL - Free Report) strengthening Apple TV+ content lineup.
Further, Disney is expected to benefit from the wide range of movies lined up for 2021 including Black Widow starring Scarlett Johansson, Legend of the Ten Rings and Shang Chi, Marvel’s first film with an Asian lead.
Moreover, apart from a compelling content portfolio, introduction of features like GroupWatch that connects friends and families to watch movies and shows from the entire Disney+ library, even when apart, is a key catalyst.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>