Disney is investing in parks for the next generation: Analyst

Disney (DIS) held its D23 2024 Expo over the weekend, unveiling first looks at some upcoming shows and movies and announcing billions of dollars in theme park expansions. Rosenblatt Securities managing director Barton Crockett joins Market Domination to discuss Disney's outlook and the state of the overall media industry.

"Disney gets most of its cash flow, a large portion of its value, the majority of its value, I think, from its theme parks. And what was concerning was the turn of the theme parks that we saw in this past quarter, where they had gone from predicting robust growth in operating income, to really expecting some pressure. And that's really in over the past month or two that the consumer has really turned," Crockett explains. He notes that parks are one of Disney's "iconic assets," and as seen at the D23 Expo, the company is investing for the "next generation of families that will bring their kids."

Amid heated streaming wars, Crockett says, "We've been more constructive on Disney, but that's really on asset value long term anchored on the theme parks, which was challenged this past quarter with the near-term kind of headwinds. So it's a difficult space." He explains that Netflix (NFLX) "is clearly running away with the ball," and other media companies are struggling to keep up.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

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Video transcript

Over the weekend, Disney held its D 23 expo unveiling first looks at upcoming movies and TV shows and announcing billions of dollars in theme park expansions.

We're just a few minutes to the closing bell on Wall Street.

We're looking at how to navigate the complicated world of streaming with the Yahoo finance playbook.

Joining us now is Barton Crockett Rosenblatt Securities Managing Director, Barton.

I wanna start with those park investments that we heard about from Disney over the weekend.

I can tell you personally, I'd love to see more Indiana Jones theme rides that they're looking into the avatar world, I think seems fun.

Maybe that's debatable to some.

But overall, what does this mean for the business of Disney and maybe bringing back some of that demand for parks and for people coming to their parks is that's obviously been an ongoing discussion surrounding the company, right?

I mean, it's, it's really an interesting time for Disney, right?

Um You know, I think of the things that they announced, probably the one I'm most excited about is that the villains area that they're gonna be bringing, uh I think to Florida.

But um look, I think that Disney gets most of its cash flow.

Um a large portion of its value, the majority of its value I think from its theme parks.

Um you know, and what was concerning was the, the turn of the theme parks that we saw in this past quarter where they'd gone from predicting robust growth and operating income uh to really uh expecting some pressure.

Um And that's really in, you know, over the past month or two that the consumers really turned.

And so the question is navigating that near term, long term, these are iconic assets.

And I think Disney is playing the long game here and they're investing um for um the next generation of families that will bring their kids there for that kind of um you know, growing up a once in a lifetime experience that that will continue generation after generation.

And um you know, so that's where they're looking.

Um And I think if you're kind of long term focused that does present an opportunity for Disney on a pullback here.

So Barton, you know, whether they're spending the money is one thing specifically how they're deploying it is another, do you think that they, the plans that they laid out are the right plans, you know, villains aside some of the other stuff as well?

Yeah, look, I mean, I'm not gonna go and, and try and parse out each specific ride, you know, I will say generally that, you know, their uh theme parks are absolutely dominant.

Absolutely iconic.

There's no one that's even close to them in theme parks and these are a durable um activity.

Um And they've shown some real great financial discipline, um investing and growing over a very long period of time.

So you have to give them the benefit of the doubt.

Um You know, if they think of villains area, if they think, um you know, a new avatar area um is what's needed in these parks.

Um The track record says they, they're probably uh more right than wrong.

But no, I wanna zoom out this conversation a little bit and talk about streaming as a whole.

Of course, that's a large part of Disney's business as well.

And to me right now, it seems like when you look at these different streamers, it's hard to make a case for maybe any stock besides Netflix as a pure streaming play.

If I'm an investor and I want to get into streaming with what we've seen in the last week with Paramount Warner Brothers.

Discovery taking these billion dollar hits on their cable business are those good stocks to avoid right now.

If you're looking to get into the streaming trade is everything else a little too exposed to other things.

You know, it's a difficult space right now.

I mean, we're um neutral right now on Netflix.

I'm Paramount on Warner Brothers.

You know, we've been more constructive on Disney, but that's really on asset value long term anchored on the theme parks, which was challenged this past quarter within your term kind of headwinds.

So it's a difficult space.

I think that um Netflix is clearly running away with the ball.

Um And the media based streaming companies are, you know, struggling to even get on the field.

Um I think that um the idea of Netflix running away with the ball though is it's kind of a challenge because a lot of their growth right now has been, you know, from the uplift from password sharing, we're going to start to lap that this quarter.

Um And I do think the subscriber growth slows substantially at Netflix um this upcoming quarter and that's gonna be um I think a challenge potentially for that equity.

So, um you know, I think that it's a difficult space and I do think that where the consumer is going um is more price sensitive.

I think the free ad supported streaming television offerings are really where there's much more kind of growth right now.

Um And it's hard to find a pure equity play on that.

Um You know, I think if you're uh looking at kind of internet media generally, um you know, the the most kind of interesting place in my mind right now are those guys that are leaning into artificial intelligence to improve the both the user experience and the and the marketer experience.

And that would be people like a meta um potentially someone like a Pinterest.

Um And uh um you know, that's kind of where I think the momentum is right now.

Um The, the legacy kind of subscription streaming is I think a difficult place uh to go totally into the legacy uh uh arena.

I do wanna ask you about the Olympics because um we did see big, big numbers um that are initially coming out here.

I saw one number 32.2 million viewers average across the TV and streaming platforms in the 1st 13 days of the games.

Um So is that a reason to take another look at Comcast?

Certainly, I think Comcast um has navigated uh the Olympics brilliantly, I mean, their um audiences I think are nearly a double from Tokyo.

And um I think that they've put on an experience there that's been praised.

Um and that has really done a lot to kind of lean into the technology so you could use peacock to watch everything and they still had prime time to pull on your traditional kind of sit on the couch in the evening and see what happened, family kind of audience.

So, you know, they've managed that they're still investing in peacock substantially.

That's their streaming service.

The bulk of cash flow at Comcast is really not driven by that at all.

It's driven by their broadband internet services where there's more competition now from fiber services that are being rolled out and from fixed wireless services that are being pushed by people like Verizon.

Um So my hats off to them.

I think they're a very good management team, but I think they too are in a difficult fight um across the spectrum of their businesses.

Yeah, Martin, as you said, a challenged area overall.

But thank you so much for helping us through it and giving us your perspective.

Appreciate it.

Great.

Thank you.