Disney’s Upside Potential and Need For Compelling Content

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Victor Dergunov, The Financial Prophet, on Disney’s (NYSE:DIS) recent earnings. DIS showed constructive revenue per user but needs a return to compelling content. This is an excerpt from Wall Street Breakfast’s recent episode Wall Street Lunch: A ‘Goldilocks’ July CPI And Disney Streaming With Victor Dergunov.

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Kim Khan: I’m really pleased to be joined by Victor Dergunov, who is an Investing Group Leader at Seeking Alpha. That Investing Group is The Financial Prophet, definitely something that you’ll want to check out.

I just wanted to get your take since I know you’ve written on this about Disney (DIS) since we’ve just had earnings and what you thought just as a quick reaction to their numbers.

Victor Dergunov: Yeah. I recently put out an article on Disney and I recently purchased my first stock in Disney. I have never actually owned their shares before. So yeah, I looked at the report and I thought it was pretty good. It was a bottom line. We had the earnings, the EPS beat slightly. And we had the revenues, it was just a minor miss. But overall, it was a good report. Revenues increased slightly year-over-year despite the economic slowdown.

So, I mean, that’s a positive. And primarily, I looked at the streaming numbers because that’s where the growth is concentrated for Disney. So that’s the most important segment to look at in my view. And Disney showing very constructive average revenue per user increases in their Disney+ segment and other segments of their streaming business.

So that’s telling me that the company is seeing better-than-expected results with their streaming, the revenue per user continues to grow faster-than-expected, and there’s much more profitability in this sector than it’s currently factored in, I believe, for Disney.

So Disney stock, it’s in an interesting spot here. It’s around a multi-year low. And I think we could see Disney potentially make a positive turn here and we could see some more upside ahead.

KK: You see any possibility about the rumors of some kind of buyout from Apple (AAPL) of either part of the company, streaming service, movie business? I mean, Parks are going strong for the Disney right now, so that could be their core business as an argument?

VD: Yes, Parks are doing very well for Disney and that’s another encouraging factor, but they’re having challenges with their movies and their content basically. So I’m not sure that Apple is going to go the route to acquire Disney assets. I’m not sure that that’s something that Apple would do. Of course, I could be wrong, but for some reason, I don’t quite see that working. But it’s always possible.

Nevertheless, I think Disney just needs to refocus their attention on their content and just start providing better viewing experiences for the public, for the consumer. And the Theme Parks are great. They have a relatively strong, sticky streaming platform. So I mean, this missing component of compelling content, something that they used to have and something that – it’s been a weak spot lately.

If they can restore this single element, I think, Disney can come together nicely and we should see significant upside ahead and then maybe Apple or another company will discuss the partial acquisition of their assets or something like that. It’s always possible, so we’ll keep an eye out for that.

KK: Great. Well, Victor, thanks so much for your time and your input. Really appreciate it. Our listeners, it’s Victor Dergunov, who runs the Investing Group, The Financial Prophet at Seeking Alpha. You definitely want to check that out, and thanks for listening. Thanks, Victor.

VD: Kim Khan, thank you. Have a great day.

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