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Strong End to Fiscal Year for Disney

Neil Macker, CFA

Neil Macker: Disney reported a strong end to is fiscal 2018, as the quarter beat on both revenue and EBITDA. While the strong end to the year was positive, the real key for the company will be fiscal 2019 and 2020, the set up of not only its streaming service, but the closing of its acquisition to the Fox Media assets. 

Disney now announced that the name of the streaming service will be Disney+, a slightly uninventive name, but one that rings true with its other OTT services, ESPN+. The real key for the company will be creating more original content for the service. The company announced the launch of a second Star Wars TV series, along with a Marvel character series based on Loki. We expect more original content based on the current IP at movies, to come to the service. 

The other key for the company will be closing the Fox assets. We expect the deal to close the first half of 2019, and the company's already received approval from the EU. We expect approval from China to occur before the end of the year, allowing the company to now reuse the assets that it acquires, and put them on its other SVOD product, Hulu. 

With that, our fair value estimate for the company is at $130 With the shares trading around $118, we believe investors should wait for pullback before investing in this medium uncertainty but wide-moat stock.