Dryden Pence on TDA Network (02/11/2021)

Dryden Pence And Brett Sifling’s Expectations For Walt Disney (DIS) Earnings

Dryden Pence and Brett Sifling say that with Disney’s Investor Day presentation, it became a growth company that is now expected to have a larger base of subscribers than Netflix in just 5 years.

February 11, 2021

What can we expect for subscriber growth at Disney?

We are actually very pleased with how Disney seems to be coming out of this; we have positive expectations. The big thing? They’re years ahead on streaming. They’re about four years ahead on streaming. A couple of years ago, Disney had almost zero recurring revenue from streaming; in a few years, it will be $16-17 billion.

So you see a tremendous increase there. And, as we move through the pandemic, you’ll see opportunity and optimism around the theme parks, and that sector will come back. So, Disney becomes a growth play, and we’ll see more streaming activity and more activity in the parks. Those things will come back, and we’re excited.

The parks are still so important; how quickly does Disney need to get these parks reopened, even at 50 percent?

If anyone can do large crowds well, it’s Disney. They have multiple global parks, so they’ve had the opportunity to learn throughout the process. So I think you’re going to find more capacity and more parks to grow. Obviously, Orlando’s open at a diminished capacity, and we’ll look at Southern California. So the biggest sources of cash in the parks between now and late summer are going to be increased capacity. It’s up to them when they open, but I think that as more people get vaccinated and as children seem less affected by this, you’ll see a tremendous, pent-up demand arise. People are saying, “When this is over with, we’ll take them to Disneyland.” Once it’s open, it’s going to be full.

Where do you stand on the stock price? 

We’re more constructive on this. Disney’s audience is not just in the United States; they have Star, part of streaming in India, and that is becoming the dominant player. In India, there are 350 million children below the age of 14. That’s bigger than the entire U.S. That’s a huge population segment. So, Disney’s global reach gives them a tremendous capacity to expand beyond this. So, we’re more constructive on this because the audience capacity they have continues to grow.

What does constructive mean in this occasion?

Disney is still on our portfolios. We’ve owned a lot of it for a long time, and it’s in our model. So for new money, they get it. 

What are your thoughts on digital overall or just Disney subscriber growth? What is it all telling you? 

It’s growing very rapidly. By 2024, it will probably be bigger than Netflix; they still have a huge footprint. The other thing we have to look at is changes in behavior. In a post-COVID world, Disney is probably the last thing anyone will give up.

More importantly, this gives them tremendous long-term recurring revenues, something they’ve really not had in their corporate structure. So we think they’ll be bigger than Netflix in streaming, and all other segments will fire on all cylinders.

When you addHulu and all those things together, they’re adding huge growth and will continue to do the same. They’re so much more than just ESPN; they’ve far exceeded that issue.