News Disney’s Q2 FY25 Earnings Results Webcast

[easyrowrdw]

Don't see how that is relevant when trying to use the market as the source of proof of management issues.

Disney isn't even the only company on the Dow 30 trading at 2015 levels but setting that aside, the Dow 30 is meant to be a cross section of the entire market. So, I am not sure what that proves?

My point is that saying DIS is at 2015 levels because management stinks (which is what the poster claimed) might be fine if there are no other issues at play. However, if all their closest competitors are facing the same problem, then is it not possible there is more going on than just management failing?

Don't get me wrong, I don't like a lot of choices Disney has made, but let's not pretend like most of the things we don't like are the same ones the market cheers on.

@Dranth as for your musings - I think the problem is Disney straight up lacks consistent peers on a ten year scale. Absolutely their peers were legacy media. But one divested, one was gobbled by a telecom, one is really a Japanese tech conglomerate. The remaining major two pivoted poorly towards 2025.

They used to have close comps. Now they are like a 50% peer to Comcast, a 30% peer to Netflix, a 25% peer to Royal Caribbean etc.

WBD and Paramount I guess are the story because they both failed to evolve in their own ways from legacy media and the cash cow that was linear.

I also think Disney might not have good peers for comparisons. They have some of the most iconic pieces of media of the 20th century. They have been pioneers in movies and theme parks longer than most people can remember. And Disney trips are a cultural right of passage for many kids. Disney is media Americana almost without equal.

So if that's what you have and your approach (in the parks) is to make money by raising prices and charging for things that used to be free, that seems like poor management to me. Not because their stock is weak but because I think it's a waste of what they have. You can’t do anything better with this thing that is a part American culture and millions of people love?

 

[Sirwalterraleigh]

Am I not reading this correctly or does this not make sense with what I wrote?

I’m playing along. I don’t want to be discouraging…

It’s my mutant X talent

 

[Sirwalterraleigh]

Precisely. It is kind of bizarre that we see some of the biggest critics here of how the company is being run to maximise profits for short-term gain jump up and down and feel vindicated when quarterly profits, attendance, or the share price don't grow enough according to their standards.

Embracing the need for Disney to squeeze higher and higher profits from the parks quarter over quarter or the share price to rise ever upwards isn't going to result in the company plowing more money into the parks to improve the guest experience with an eye to longterm brand loyalty. It encourages them to squeeze as much blood from that stone as they can and then discard it when they don't see any opportunities for it to continue generating sufficient growth. I am sure plenty of the investors who drive the share price would much prefer they did that than invest billions in new attractions, for example.

Some of those same people will tell you they were adamantly opposed to leadership doing press and chasing quarterlies…or letting a yutz label them as “tech” or “content” instead of physical product to satisfy their Steve Jobs inferiority complex…

Also they might suggest the only way to ultimately preserve it is to go private.

 

[Chef Mickey]

The idea that corporations have to make more money year after year is one of the biggest problems with American society.

It also is a benefit to society. You can't just highlight a general problem and not also understand its benefits. Competition and potential to make profit are what give us everything. Remember, the natural state is poverty and no stuff.

 

[Kamikaze]

We know what’s coming next…and it’s wrong as always

Why don’t you tell the class exactly what’s ‘next’ instead of being purposely vague so you can’t be wrong?

 

[Chef Mickey]

In case others did not understand the arguments I was making, net income is artificially lowered because of acquisition and impairment charges.

You could make 60k for a number of years and serially invest and defer your 401k tax benefits. Then one year make 100k and claim 60k of deferred tax credits and say your net is 40k.

Would you claim that individual is less “profitable” that year? Only in the eyes of the IRA. Technically that year they not only made more but they also paid less taxes than ever before.

This has occurred with Disney with impairment charges (namely Star India) and the Hulu aqusition; when trying to compare fiscal 2024 with 2018. In reality they made the same money when you actually strip away those things.

What happened from 2019-2023 was primarily a linear decline, startup Disney Plus costs, a contraction in the theatrical landscape, a major political and corporate raider episode(s) and a temporal collapse in their worldwide experiences business with a pandemic (which by the way is now significantly fiscally stronger than 2018 by 152%). The latter of which is extremely negatively correlated to their stock price by circumstance. I understand that’s a lot of excuses… but they are the excuses.

Since 10 years ago: linear makes 3.9B less and parks + consumer products make 5.3B more. That’s really 75% of the story, but I know people want to draw their own narrative from only the top line numbers.

Which is a transition they managed poorly. Also, earnings are not all created equal. Sub revenue is treated differently than consumer products and park revenue. These are not reliable income streams that investors want. It's valuable, but is the reason NFLX is much more valuable. Their earnings are predictable, durable, and higher margin. Imagine having to pour 80 cents of every dollar into labor and maintenance to keep up the parks. It's a fine business, but you want to expand your TV/Content and streaming business more so than you want to increase park revenue.

Their primary strategy for parks has just been stepping on peoples' throats too...not innovating or delivering better products and services to guests.

NFLX is literally worth 2.5X of all of Disney and they only do content. Disney could and should be performing better in this area. Maybe they eventually will, but it's been poorly managed thusfar. Too much spent on the wrong content, wrong strategy, bad movies, bad TV content, ESPN overpays, NBA overpay, etc.

Disney's brand is stronger than Netflix but they aren't taking advantage of it, at all.

 

[Chef Mickey]

Who do you consider their peers and how have those stocks performed over the last 10?

Outside of Netflix (which gets treated like a tech stock) have many of them done much better?

It's a fair question, but comparing to NFLX is also fair.

Disney doesn't have any direct competitors in terms of how companies are organized. I explained in a prior post that comparing them to VZ or Comcast is also unfair because those companies have paid huge dividends in the last 10 years (which Disney has not) and both manage extensive physical legacy broadband and cell networks which have endless regulatory pressures, maintenance, and other issues that make the profitability limited.

 

[Sirwalterraleigh]

Why don’t you tell the class exactly what’s ‘next’ instead of being purposely vague so you can’t be wrong?

Everything el stupor says is “correct x -1”. The book is out

 

[Sirwalterraleigh]

It also is a benefit to society. You can't just highlight a general problem and not also understand its benefits. Competition and potential to make profit are what give us everything. Remember, the natural state is poverty and no stuff.

That’s an interesting take on supply Side…I think I like it

 

[BrianLo]

Which is a transition they managed poorly. Also, earnings are not all created equal. Sub revenue is treated differently than consumer products and park revenue. These are not reliable income streams that investors want. It's valuable, but is the reason NFLX is much more valuable. Their earnings are predictable, durable, and higher margin. Imagine having to pour 80 cents of every dollar into labor and maintenance to keep up the parks. It's a fine business, but you want to expand your TV/Content and streaming business more so than you want to increase park revenue.

Their primary strategy for parks has just been stepping on peoples' throats too...not innovating or delivering better products and services to guests.

NFLX is literally worth 2.5X of all of Disney and they only do content. Disney could and should be performing better in this area. Maybe they eventually will, but it's been poorly managed thusfar. Too much spent on the wrong content, wrong strategy, bad movies, bad TV content, ESPN overpays, NBA overpay, etc.

Disney's brand is stronger than Netflix but they aren't taking advantage of it, at all.

You've just summed up why I am bullish on Disney's growth via streaming. Linear-like money is there as Netflix is now showing us. Netflix had a 12 year head start and Disney has really sped run to where Netflix was only 6-7 years ago.

I don't know why everyone expected it would occur any faster when no one, including Netflix, got there that quickly. Plus we were given quite clear guidance. I'd love to have this conversation again in a few years, if D+ hasn't progressed a few more steps down Netflix's financial roadmap, then it's a problem. But thus far they've been doing extremely well.

 

[Sirwalterraleigh]

You've just summed up why I am bullish on Disney's growth via streaming. Linear-like money is there as Netflix is now showing us. Netflix had a 12 year head start and Disney has really sped run to where Netflix was only 6-7 years ago.

I don't know why everyone expected it would occur any faster when no one, including Netflix, got there that quickly. Plus we were given quite clear guidance. I'd love to have this conversation again in a few years, if D+ hasn't progressed a few more steps down Netflix's financial roadmap, then it's a problem. But thus far they've been doing extremely well.

Actually…they just did a pretty good job of painting an accurate picture and you kinda sidestepped that and pivoted.

Still waiting for any evidence that taking on all the content costs on your own streaming service is wise…they already have chopped and slashed heavily…

I know THEY think they can charge $200 and month and espn circa 2000 as rates and no one will resist it…but some people are actually required to keep their feet on this planet.

 

[BrianLo]

Actually…they just did a pretty good job of painting an accurate picture and you kinda sidestepped that and pivoted.

Still waiting for any evidence that taking on all the content costs on your own streaming service is wise…they already have chopped and slashed heavily…

I know THEY think they can charge $200 and month and espn circa 2000 as rates and no one will resist it…but some people are actually required to keep their feet on this planet.

I’m not sure I pivoted, I just clearly don’t share the same outlook that the vast majority of this forum do. That year 3 will look like year 6 that looks like year 9.

Disney DTC already is where you said it wouldn’t be. Netflix is already where you said streaming could never actually grow to (a viable financial linear replacement). Netflix hasn’t managed to find the ceiling yet and they are the ones leading the pack.

 

[Chef Mickey]

You've just summed up why I am bullish on Disney's growth via streaming. Linear-like money is there as Netflix is now showing us. Netflix had a 12 year head start and Disney has really sped run to where Netflix was only 6-7 years ago.

I don't know why everyone expected it would occur any faster when no one, including Netflix, got there that quickly. Plus we were given quite clear guidance. I'd love to have this conversation again in a few years, if D+ hasn't progressed a few more steps down Netflix's financial roadmap, then it's a problem. But thus far they've been doing extremely well.

I used to own several thousand shares of DIS and sold it at in the $140s and even some in the $130s as I was unhappy with Disney+ and their overall spending. I also think they've largely ruined the Park experience, even if the revenue is still good. Hey, it's expensive to go there and Disney has a strong brand. I do think and have argued here the park revenues are tough to screw up.

My thesis for owning so much Disney was the content, the brand, and potential for streaming. They just suck at it, but it COULD and SHOULD happen, someday. I just invested in other areas and have already easily outpaced Disney which eventually fell into the $80s.

I do think when Iger leaves, it's a buy again. I also think the terrible CFO leaving is doing some good on the spending front and maybe already showing some benefit. I think they've quietly removed some Senior leadership, but I can't be sure exactly who. Some people I've heard are unhappy and although the activist investor didn't get a board seat, I think it woke some people up a couple years ago.

I think Disney should be worth NFLX and probably another 50% for its parks, movies and just overall better brand. Disney is probably a top 10 brand in the entire world, despite everything. That would mean Disney would trade at about $400 instead of $100.

The fact NFLX is 2.5X more valuable tells me how horribly it's managed along with its negative 10 year return. Ridiculous. If you're patient, you'll likely be rewarded and you'll be shocked what a competent CEO can do when Iger finally leaves. They just have to find one. Iger was competent at some point, but he's either corrupted or he just doesn't care. I think politics has made decision making questionable as well when they should have been more neutral.

 

[Nubs70]

I also think Disney might not have good peers for comparisons. They have some of the most iconic pieces of media of the 20th century. They have been pioneers in movies and theme parks longer than most people can remember. And Disney trips are a cultural right of passage for many kids. Disney is media Americana almost without equal.

So if that's what you have and your approach (in the parks) is to make money by raising prices and charging for things that used to be free, that seems like poor management to me. Not because their stock is weak but because I think it's a waste of what they have. You can’t do anything better with this thing that is a part American culture and millions of people love?

Not a peer but compère $DIS to S&P 500. Compare $DIS 10 year stock return to s money marketenter fund.

 

[GhostHost1000]

But the Fox is in charge of the henhouse.

and another Fox that Disney overpays for

 

[Kamikaze]

Everything el stupor says is “correct x -1”. The book is out

You're still not saying anything.

State your exact point.

 

[Dranth]

I think the problem is Disney straight up lacks consistent peers on a ten year scale.

Disney doesn't have any direct competitors in terms of how companies are organized.

Both fair comments, and I don't disagree, but I would argue that if you look at those that have operational overlap, you see a similar headwind.

My point is that the whole entertainment sector just seems to generally be out of favor which needs to be part of the equation when evaluating Disney as a whole. Sure, each company will have specifics unique to their own exposure that pull them up or down, and it is absolutely fair to say management shares some part of the blame, how much seems to be where the disagreement comes in.

 

[HauntedPirate]

People comparing parks revenue from 2015 to today need to remember it’s not comparable - The division was Parks & Resorts then, and during Chapek’s reign there they added consumer products to it.

Bob cared for maybe 3-5 years and checked out after that. And he has never, ever, understood theme parks, and never even bothered to try.

 

[Sirwalterraleigh]

You're still not saying anything.

State your exact point.

…but I don’t want to be mean

 

[Sir_Cliff]

It also is a benefit to society. You can't just highlight a general problem and not also understand its benefits. Competition and potential to make profit are what give us everything. Remember, the natural state is poverty and no stuff.

The post you are responding to didn't suggest profit was bad, though. It suggested that demanding that profits must endlessly grow is negative. For example, if Disney knew they would make $1 billion dollars profit each quarter adjusted for inflation forever off their parks but there was no potential for those profits to grow any further, the company would be disincentivised from investing in them in favour of other businesses with greater growth potential. The end result could be that a highly profitable and viable business that keeps tens if not hundreds of thousands of people employed is destroyed because of low growth potential.

It was, in fact, this mentality that led WDW to stagnate during much of Iger's tenure and the development of all of these different mechanisms for squeezing more profit out of the existing facilities rather than pouring more money into what they considered a mature (but highly profitable) business with low growth potential. This also helps explain why investors are far more interested in streaming than the parks and resorts division: they see more potential for growth even if it will struggle to be as profitable anytime soon.