SkipperButler
Active Member
the integrity of World Showcase was lost when they let it turn into a glorified bar-crawl.
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Frozen complainers are finally making headlines.
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the integrity of World Showcase was lost when they let it turn into a glorified bar-crawl.
JoeCamel
Well-Known Member
http://www.investopedia.com/articles/02/041702.asp
For all those that do not appreciate the depth of PO4's posts about buybacks.
For all those that do not appreciate the depth of PO4's posts about buybacks.
GoofGoof
Premium Member
I don't disagree with this. No company is too big to fail.
However, I'm not sure that TWDC is necessarily heading down the path to failure or bankruptcy. Look at the theme parks which we tend to focus on most. DLR has a mess not too long ago. They invested heavily in fixing the issues. Now DLR is doing as well as it has ever done.
lazyboy97o
Well-Known Member
There seems like there may well be more trouble brewing between Disneyland and Anaheim. The success of rebuilding Disney's California Adventure just seems to have granted Disney room to continue doing as they have been doing in the U.S. There has been a lot of talk about a new building boom at the Disneyland Resort but it keeps getting held up.
Spielberg seems to think the tent pole films only strategy spearheaded by Disney will be catastrophic for all of Hollywood. It's hard to think he is wrong since the whole strategy is built on more and more eggs in fewer and fewer baskets.
GoofGoof
Premium Member
Here's another interesting read about stock buybacks:
http://www.bloomberg.com/news/2014-...d-almost-all-profits-on-buybacks-payouts.html
It's not just Disney that has gone buyback crazy. To summarize the article: the S&P 500 companies are projected to spend $914 billion or 95% of their earnings on stock buybacks and dividends this year. That's a pretty staggering number. Besides fueling a great stock market for the last few years, it has also made many executives rich since buybacks are great at increasing the value of stock options.
Disney actually looks good considering they have plenty of cash and are using much less than 95% of earnings on share buybacks. Lots of companies are funding buybacks using cheap debt.
GoofGoof
Premium Member
Spielberg would know more than me on the film business, but Disney at least has strong brands. They may not all be home runs, but the Marvel and Lucas films should provide pretty health returns for the next 5+ years. After that, who knows. How many Captain America movies can they really pump out before they start to eventually slow down?
ford91exploder
Resident Curmudgeon
I particularly like the last sentence.
Watch out, however, if a company is merely using buybacks to prop up ratios, provide short-term relief to an ailing stock price or to get out from under excessive dilution
ford91exploder
Resident Curmudgeon
Erm no, Disney is using between 50% and 114% of it's free cash flow on buybacks, The percentages vary depending on how you value TWDC's free cash flow.
lazyboy97o
Well-Known Member
Reputation is something that carries through films and it can be marring. Nobody has a stronger set of brands than Disney and it is rather wise to keep Marvel, and probably Star Wars, off of the strong Disney billing. It might not even be Disney themselves that cause the trouble. Similar genres could tire out audiences. The theater experience also impacts how audiences respond. Pixar and Marvel at present are anomalies and we saw at Disney in the 1990s with animation what happens when big success becomes the expected baseline.
GoofGoof
Premium Member
They did ramp up buybacks this year above their usual run rate, but the 20% number is what Iger and Rasulo quote as their annual target. They did say last summer that they planned a slow down in capex in 2014 and a ramp up in buybacks. Here's another interesting article on their buyback strategy over the last 3 years:
http://seekingalpha.com/article/2285163-disney-getting-a-good-return
xdan0920
Think for yourselfer
One time a tree went to space but it used a submarine to get to the center of the volcano. It's all a moo point though, as we all know alligators can't talk.
Cesar R M
Well-Known Member
Talk about getting severely "mad" over nothing.
Maybe you should take a break from the forum. seriously.
You're taking this way too personally now.
Bairstow
Well-Known Member
Could you elaborate on what you mean by "successful"?
I ask because while Maelstrom has never been a headliner attraction for EPCOT, it has also never been an unpopular one. Standby wait times are rarely below 20 minutes during a normal day, making it the third-longest wait in the park after Test Track and Soarin'.
Adding the Frozen overlay to it will likely bring in a lot families with young girls and/or fans of the movie, but it may also create new problems and guest complaints due to so many more people trying to ride a low-capacity boat ride with fairly limited internal space for show scenes (especially at the ride's climax) or elaborate queues. I have my doubts whether 1) guests eager to see the brand new Disney ride based on their highest-grossing animated feature to date will be satisfied by what the existing Maelstrom hardware allows and 2) whether any amount of re-engineering of the ride will allow WDI to boost capacity hjigh enough to prevent miserably long queues from forming. Even if there's a ton of Frozen merch to be sold in the inevitable gift shop, I'm not so certain these potential headaches are worth it to Disney.
AMartin767
Active Member
This quote is a perfect example of the slow decline I'm talking about. This isn't about Disney parks going bankrupt, this is about a set of parks that continue to slowly degrade themselves into marginalized mediocrity which inevitably leads to less attendance and a lower financial value. Some of the big name companies mentioned have gone through just this type of decline (Sears, K-Mart, Sun Micro systems, etc.) and at one time, no one would have believed these companies would face such a fate. This move with the overlay is yet another among many steps in the wrong direction.
The WDW resort has grown to a size and complexity that demands it lead others in its industry and for many years it did. If it no longer maintains that lead, it withers. A decline in quality has definitely happened over the past 15 to 20 years and is fully obvious. These declines happen over long periods of time and are not always evident by just looking at a balance sheet. I believe that the current course that leadership has for the parks is taking it to a lesser point overall . Less interest leads to less attendance which leads to lower revenue and less capital to reinvest. Who among us is willing to say that Future World is okay as it is right now? Yet, we think overlaying an attraction in Future World is the right course of action at this time? Disney should be laying serious capital into Future World while still building this attraction in a proper location. Who among us is willing to say that a long-term Frozen attraction will be better in place of the Norway attraction than as a full-featured attraction in the Magic Kingdom? Yet, we argue this overlay is the right move?
In one breath some argue that Frozen is the greatest property Disney has had in years, yet insist that treating it to a smaller, lesser implementation is better than giving it a just representation as a full attraction in the Magic Kingdom, WHERE IT BELONGS! Almost every other princess related attraction is located in Fantasyland in the Magic Kingdom, are they not? Or at least in HS. Seriously, who thinks slapping this over a ride that was meant for a country it represented is a better move? I don't understand that argument even if it is for monetary reasons in the short term, these are NOT short-term parks are they? Who believes that Walt Disney World should plan for their parks for only the next 5 to 7 years? Really?
prberk
Well-Known Member
You know, it seems to me that they ought to be able to find a space at the MK to do a nice new ride for Frozen. A dark ride would be perfect, like Maelstrom is, but MK would provide the opportunity to both fit it into the Fantasyland theme AND build it from the ground up. Where, you say? Well, it seems like we could make a real investment and either put it in place of some of the silly circus theme land (which I do not see anyone caring that much about), or actually in place of 20,000 Leagues -- and use the water as the water that freezes over with boats in it in the film, as you approach the ride. The show building could be located wherever nearby that it would fit, even outside of the berm (like they did in DL with the Indiana Jones Adventure), just adjusting parking or facilities outside the berm if needed.
And over in EPCOT, actually put a budget and timetable in place to renovate Maelstrom and other attractions with updates -- and finally bring in Spain or Brazil, as has been rumored in the past. And start broadcasting a weekly TV show from EPCOT that features science and world discovery.
Bring back diverse entertainment to WDW, and go back to having each part of it hitting on all cylinders, creating a more comprehensive whole and a truly magical, diversified vacation experience.
ParentsOf4
Well-Known Member
The stock market always overreacts. If a company's stock seems high, then it is almost certainly too high. There's a reason they call it a "rally". It's a bunch of traders egging each other on, artificially driving up the price.
As you note, Enron is cited not because Disney is another Enron but to show everyone just how stupid the stock market can be. There were plenty of warning signs for Enron, including several shouting "The Emperor's New Clothes", yet the market ignored them because it was a "rally". Frankly, many traders don't care about fundamentals. They only care about riding trends.
In Disney's case, the stock has skyrocketed recently. Disney reported some great numbers but the $6 billion in stock buybacks in 2014 didn't hurt the stock price either.
What's Disney going to do in 2015? Top the successes of Frozen and Guardians of the Galaxy? Guess what, that's already built into today's stock price. The market already is assuming Frozen 2, Guardians of the Galaxy 2, Avengers 2, Star Wars 7, etc. are all going to be mega-blockbusters. It's already assuming Shanghai Disneyland is going to generate tons of revenue. It's already assuming ESPN will remain a cash cow.
Why? Because the market always overacts.
If any of these properties has a major miss, then Disney stock will be pummeled. Not because Disney did anything wrong, but because the market already has sky-high expectations built into the current stock price.
Net income was up 22.2% in 2014. What happens if it's not up another 22.2% in 2015?
Disney spent $6.7 billion in stock buybacks in 2014. (Net income was $7.5 billion.) What happens if Disney does not buy another $6.7 billion in stock?
Bringing it back to this thread, Frozen 2 is not going to be a "surprise blockbuster" like the first Frozen because everyone expects it to be a blockbuster. In fact, if it's anything less than a blockbuster, then that will be a surprise (to Wall Street). No one on Wall Street expects "Frozen fatigue" to set in. If it does, then Disney's stock will suffer.
I'm simply suggesting to not use stock price to judge the success of a company.
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PhotoDave219
Well-Known Member
The NYT's take on frozen: http://t.co/nXud9ND4Rq
epcotWSC
Well-Known Member
Personally, I like Tangled way more than Frozen. However, from a marketing standpoint, I can see why Frozen got so popular in comparison to Tangled. More female empowerment, catchy songs, and the like. If you take out Let It Go, does Frozen become as popular as it is? That one song I think put the movie over the top. The overall plot is OK and has quite a few holes, but people eat it up. Now that it's huge, it's going to stay huge for a while.
The interesting thing for me with Frozen will be if Disney can put out another hugely popular movie any time soon. In the late 80s/90s Disney was putting out hit after hit. It will be a different dynamic if Frozen is the only huge hit for years.
The interesting thing for me with Frozen will be if Disney can put out another hugely popular movie any time soon. In the late 80s/90s Disney was putting out hit after hit. It will be a different dynamic if Frozen is the only huge hit for years.
from the article, "Disney’s success is that many of its best customers are still learning how to read and don’t care what things cost."
I had to laugh at this because IMO, the author may not know that this applies to the adults as well, at least the "not caring about what things cost" part. Well, perhaps the not knowing how to read part as well, lol. I joke, I joke.
GoofGoof
Premium Member
I don't disagree with any of this. The only point I was making above is that this is a trend among most companies out there. Disney is far from alone in this trend. When you generate cash from your business there are really 3 uses for it: reinvest in the business, return it to shareholders or keep it as cash. In 2008 when the credit markets crashed most companies began hording cash. It made sense at the time since there wasn't a reliable source for cheap borrowing. After the stimulus and government intervention there is an abundance of extremely cheap cash available to any company who needs it. Carrying excess cash is not necessary. The mix between return to shareholders and reinvestment seems a bit skewed recently, but that trend has to ease up some as companies will need to reload and start investing again in their operations. The point of the government making policy which facilitated cheap capital was that companies would reinvest in themselves creating jobs and growing the economy. Instead a lot of companies spent more on buying back stock which made for a very nice Wall Street rally, but wasn't much help on Main Street.
From a Disney standpoint, I think we will see this year a decrease in buybacks, but I think the street is ready for it. Rasulo implied a pullback in the stock buybacks on the earnings call:
"Well, I am not going to – I am not going to make you happy with my answer, because I am really not going to give you any guidance into what the level of buyback would be. But I will remind you of this, we have said that over the long run we look towards about 20% of the cash generated by the company being a return to shareholders in the form of dividends and buybacks. We have been very much on track with that. You know what the numbers have looked like over the last 3 years that have been in that range between $3 billion and this year’s $6.5 billion on an annual basis. You saw that we opportunistically given what happened in the marketplace, we opportunistically took a big buyback in so far this fiscal quarter, I would not look to that number for guidance on what the whole year would look like in terms of the pace. But obviously we will – we meet the board on this subject. That meeting is coming up and we haven’t – we have neither made a decision as to what the level will be yet nor am I inclined to announce that, but as I said part of our fundamental philosophy has been to use that vehicle on an opportunistic basis to return capital to the shareholders."
If they planned another large buyback he would have led with that in the prepared comments. Giving no guidance but reminding the analysts that their target is 20% of cash generated implies to me a decrease. Now if they have another smash hit like Frozen and there is excess cash again they can "surprise" the street with a larger buyback that is sure to boost the stock price. Better to promise less and overperform than promise more and underperform.
When he says 20% of cash generated by the business I assume that means Cash Flow from Operations. The 2014 number is significantly higher than that. Their CF from operations was just under $10B. They spent $3.3B on capex mostly in P&R and spent $6.7B on buybacks. By my math that's 67% on buybacks. The past 3 years before 2014 the run rate was close to or a little below the 20% he quoted. In those years CF from operations was lower and capex was higher so it makes sense. Based on these comments and past history I would not be surprised to see stock buybacks drop back down.
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