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By Neil Macker, CFA | 08-09-2017 10:00 AM

Disney Shares Look Attractive Today

We are maintaining our wide-moat rating and fair value estimate for the firm.

Shares of Disney fell Wednesday after the firm posted mixed quarterly results with revenue coming in below expectations. 

Along with earnings, the company also announced acquisition of an additional 42% share of BAMTech, raising Disney's ownership to 75% of the direct-to-consumer streaming tech firm that was spun out of MLB Advanced Media. The firm will use BAMTech to launch a new ESPN streaming service in 2017 and a family-focused DisneyLife channel in 2019.

Revenue was flat versus last year at $14.2 billion as the growth at parks and resorts offset the declines at the studio and consumer products. Media networks revenue fell 1% as affiliate fee growth was weaker than expected at 2% year over year, despite a 7% increase in contractual rates. While worrisome, we think that the inclusion of Disney channels in every streaming pay TV service available demonstrates the strength of the firm's overall channel package. Advertising declined 6% due to lower impression and two fewer NBA finals games. Operating margin for the segment fell by 840 basis points due to higher content costs including the NBA rights.

We are maintaining our wide moat rating and fair value estimate for the firm and with shares trading in the 4-star range, the stock may offer an attractive entry point for investors.

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