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The Walt Disney Co DIS

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

After a Rough Start to 2020, Pay Television Shows Modest Improvement During the Second Quarter

Analyst Note

| Michael Hodel, CFA |

Following an ugly start to the year, trends in the pay television industry didn’t worsen materially during the second quarter. We estimate the industry lost about 1.6 million net customers in the U.S. during the quarter (to around 86 million), better than the 2.0 million lost in the prior period but worse than 1.3 million lost during the same quarter a year ago. The year-over-year change in customer losses was the smallest in nearly two years, per our estimates. More important, the second quarter is usually seasonally weak as snowbirds head north and college students head home, often disconnecting service. While 2020 is far from a normal year and seasonal swings have likely steadily diminished with the rise of online content options, the sequential improvement amid the worst of the pandemic and sports shutdown provides some evidence supporting our view that the industry isn’t headed for a customer death spiral, a key element of our fair value estimates and moat ratings across much of the media sector, including Disney, Comcast (NBC Universal), AT&T (Warner), Fox, and ViacomCBS.    

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Company Profile

Business Description

Walt Disney owns the rights to some of the most globally recognized characters, from Mickey Mouse to Luke Skywalker. These characters and others are featured in several Disney theme parks around the world. Disney makes live-action and animated films under studios such as Pixar, Marvel, and Lucasfilm and also operates media networks including ESPN and several TV production studios. Disney recently reorganized into four segments with one new segment: direct-to-consumer and international. The new segment includes the two announced OTT offerings, ESPN+ and the Disney SVOD service. The plan also combines two segments, parks and resorts and consumer products, into one. The media networks group contains the U.S. cable channels and ABC. The studio segment holds the movie production assets.

Contact
500 South Buena Vista Street
Burbank, CA, 91521
T +1 818 560-1000
Sector Communication Services
Industry Entertainment
Most Recent Earnings Jun 30, 2020
Fiscal Year End Sep 30, 2020
Stock Type Classic Growth
Employees 210,000

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