The Walt Disney Company, headquartered in Burbank, California, is one of the most well-known corporations in the world. Disney is a well-known and popular family entertainment and media enterprise (The Walt Disney Company, 2020). The venture incorporates Disney Parks and the accompanying experiences and products (DPEP), Disney Media & Entertainment Distribution (DMED), Disney Studios, General Entertainment Group, and Disney Sports (The Walt Disney Company, 2020). Overall, the company is highly diversified and a viable investment option.
The main reason for investing in the Walt Disney Company is that it is a versatile organization with multiple profitable segments of operations. As a big capitalization company, Walt Disney has a significant earnings power, which validates its perspectives in a long-term competitive presence in its market. The sources of cash flow range from media networks, parks, entertainment, experiences and products, radio and television networks, broadcasting, and film production (“Last Assignment: Corporate Governance,” 2022). The investment in such a large and overall well-developed enterprise is motivated by the guaranteed return on investment in a long-term perspective. Indeed, since the company has a long history and a reputable brand that is recognized internationally, the profit-making capacity is ensured, which is a beneficial validation of the decision for investors’ activism. Thus, the investors have an opportunity to obtain long-term benefits from the company’s activities due to the omnipresence of the company in its various domains of performance.
However, one should consider the shift in consumer behavior due to the recent COVID-19 pandemic, which has minimized social interaction and reduced the demand for visiting parks and entertainment. Such a turn of events might be a negative factor in the likelihood of investing in the company. Nonetheless, the reason why it is still worthwhile is that the organization does not limit its profit sources to entertainment only. In particular, having operations in film production under such banners as Walt Disney Pictures, Pixar, Marvel, Touchstone, and Lucasfilm, Walt Disney has access to stable profit-generating spheres (“Last Assignment: Corporate Governance,” 2022). Moreover, it owns multiple trademarks, which enhances its income stability. Such a business strategy of product and service diversification within the context of global presence enhances the company’s corporate value and makes it a reasonable investment option.
Although the COVID-19 pandemic has substantially impacted the company, it is a worthwhile long-term investment. Financial forecasts predict a stable increase in the value of the company’s stock in the next 12 months, with a median projection of a 39.57% increase on the last stock price of $138.64 (CNN, 2022). Thus, the stock price is estimated to rise to $193.5, while earnings per share are expected to increase to over $2 per share compared to the current $0.74 per share (CNN, 2022). In addition, sales are predicted to increase to $83.4 billion in 2022 and $93.0 billion in 2023 (CNN, 2022). It can be assumed that with the ease of preventative measures to stop the spread of COVID-19, more people are likely to visit Disney Parks, increasing the company’s overall revenue. In addition, Disney remains one of the leaders in digital entertainment, with Disney Studios producing successful outputs. Thus, it can be argued that Disney will grow further in the near future and, therefore, is a viable investment.
In addition, historical and current data also indicate that Disney is a good perspective investment. A market capitalization of 283 and a dividend yield of 0.7% indicate that the company is stable (“Last Assignment: Corporate Governance,” 2022). In addition, the company has a stable cash flow of $1.99 billion, a high gross margin of 33.06%, an operating margin of 4.46%, and a profit margin of 2.96% (Stock Analysis, 2022). Nevertheless, some of the measures can be further improved through active engagement.
The Walt Disney Company is a family-focused entertainment company that provides customers with a range of leisure options. The company’s mission is to “entertain, inform and inspire people around the globe through the power of unparalleled storytelling” (The Walt Disney Company, 2020, para. 1). Disney strives to incorporate innovative technologies in delivering entertainment to customers and aims to employ the most creative minds in the industry to ensure its position in the market (The Walt Disney Company, 2020). Furthermore, such measures as return on equity (ROE) and return on invested capital (ROIC), among others, should be considered (“Last Assignment: Corporate Governance,” 2022). Although the current ROE measure is low at 2.3%, the venture’s ROIC is relatively high at 3.8% (Stock Analysis, 2022). In addition, the return on assets (ROA) is low at 1%; however, it should be noted that the company has little debt and a debt-to-equity ratio of 1.08 (Stock Analysis, 2022). Disney’s Total Shareholder Return is evaluated at a low 52% (“Last Assignment: Corporate Governance,” 2022). Considering these measures, it can be argued that Disney is a feasible option for investment.
Disney is a publicly-traded company with a dispersed ownership structure, with no single shareholder controlling the company. Nearly 67% of all shares are held by mutual funds and other institutional investors (CNN, 2022). The largest institutional investor is the Vanguard Group, Inc, a mutual fund that holds 7.15% of Disney shares (CNN, 2022). The Second largest investor is BlackRock Fund Advisors mutual fund which holds 4.24% of shares (CNN, 2022). It is unclear if these institutional investors are activist shareholders.
Moreover, the company’s board of directors can be defined as a monitoring board due to the fact that the majority of board members are not employed by Disney (The Walt Disney Company, 2021). In addition, the responsibilities are separated between the chairperson & CEO. Thus, the CEO, Robert A. Chapek, is responsible for managing the company’s operations (The Walt Disney Company, 2021). Meanwhile, the chairman, Robert. A. Iger, is tasked with providing leadership to the board and ensuring the board of directors and the management team communicate clearly (The Walt Disney Company, 2021). Thus, the company is well-managed and monitored by external board members.
It can be argued that the company’s quality of management is high due to the experience of the board members and Disney’s sensitivity to risk. The majority of board members occupy executive positions in other major companies, such as Nike and Oracle Corporation (The Walt Disney Company, 2021). Thus, they can recognize the potential blunders of the Disney management team, prevent them from happening, and ensure the interests of both the company and the shareholders are considered. In addition, the company’s annual report accounts for a variety of business, economic, market, and operational risks (The Walt Disney Company, 2021). The report indicates that the company is aware of all potential risks and is prepared to mitigate such risks should they arrive.
The main engagement point that should be addressed when investing in Disney is improving market value through diversifying the customer base. It can be argued that the entertainment and digital outputs of the company are aimed primarily at children and young adults, while other age groups are not catered to. Therefore, the corporation should consider investing in products for other age groups to bring new revenue streams to the company.
CNN. (2022). DIS – Walt Disney Co forecast. Business News – Latest Headlines on CNN Business – CNN. Web.
Last Assignment: Corporate Governance [PowerPoint]. (2022).
Stock Analysis. (2022). The Walt Disney Company (DIS). Web.
The Walt Disney Company. (2020). Disney – Leadership, history, corporate social responsibility. Web.
The Walt Disney Company. (2021). 2020 Annual Report. Web.