DIS - Disney: Long-Term Progress Overshadowed By Q3 Guidance

2024-05-07 16:09:52 ET

Summary

• The Walt Disney Company is expecting a down quarter for its Direct-to-Consumer business.
• However, the year-to-date DTC operating results trend shows significant improvement, with a $600 million improvement in one quarter and $1.5 billion in six months.
• The market is overreacting to the third quarter issues, but Disney management has likely resolved them so they will not transition to long-term problems.
• ESPN will transition to streaming. But ESPN will not be giving up linear.
• Disney Free Cash Flow increased roughly $3 billion YTD.

The Walt Disney Company ( DIS ) has made solid progress since the coronavirus shutdowns really threw the company a unique set of challenges. Additionally, the last article continued the coverage of a successful board fight (another challenge or distraction and expense management did not need), which meant that the company had a united experienced team. But the (upcoming) fiscal third quarter events will last one quarter, whereas the long-term outlook for a growing, cash-generating giant headed by an experienced team remains (along with a far higher stock price). It is far more important for this management and board as a team to implement the plan they have in mind while course-correcting as needed.

Bad News First

Management is basically expecting a down quarter for the Direct-to-Consumer, or DTC, business. Anytime an announcement like that happens, Mr. Market has a predictable reaction that looks like "losses everywhere forever." But no one ever stated that the path to profitability was straight up with no challenges along the way....

For further details see: