Stock of the Day

January 5, 2021

Walt Disney (DIS)

$113.85
+$1.32 (+1.2%)
Market Cap: $204.79B

About Walt Disney

The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company produces and distributes film and television video streaming content under the ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels, as well as ABC television stations and A+E television networks; and produces original content under the ABC Signature, Disney Branded Television, FX Productions, Lucasfilm, Marvel, National Geographic Studios, Pixar, Searchlight Pictures, Twentieth Century Studios, 20th Television, and Walt Disney Pictures banners. It also offers direct-to-consumer streaming services through Disney+, Disney+ Hotstar, Hulu, and Star+; sports-related entertainment services through ESPN, ESPN on ABC, ESPN+ DTC, and Star; sale/licensing of film and episodic content to third-party television and VOD services; theatrical, home entertainment, and music distribution services; DVD and Blu-ray discs, electronic home video licenses, and VOD rental services; staging and licensing of live entertainment events; and post-production services. In addition, the company operates theme parks and resorts comprising Walt Disney World Resort, Disneyland Resort, Disneyland Paris, Hong Kong Disneyland Resort, Shanghai Disney Resort, Disney Cruise Line, Disney Vacation Club, National Geographic Expeditions, and Adventures by Disney, as well as Aulani, a Disney resort and spa in Hawaii. It also licenses its intellectual property to a third party for operations of the Tokyo Disney Resort; licenses trade names, characters, visual, literary, and other IP for use on merchandise, published materials, and games; operates a direct-to-home satellite distribution platform; sells branded merchandise through retail, online, and wholesale businesses; and develops and publishes books, comic books, and magazines. The company was founded in 1923 and is based in Burbank, California.

Walt Disney Bull Case

Here are some ways that investors could benefit from investing in The Walt Disney Company:

  • The current stock price is around $113.54, which may present a buying opportunity for investors looking to enter at a lower price point compared to its 1-year high of $118.63.
  • The company reported strong quarterly earnings, with earnings per share (EPS) of $1.45, exceeding analysts' expectations, indicating robust financial performance.
  • Revenue growth of 7.0% year-over-year demonstrates The Walt Disney Company's ability to increase sales, which is a positive sign for future profitability.
  • With a market capitalization of approximately $204 billion, The Walt Disney Company is a major player in the entertainment industry, providing stability and potential for long-term growth.
  • The stock has a "Moderate Buy" rating from analysts, suggesting that there is confidence in the company's future performance and potential for price appreciation.

Walt Disney Bear Case

Investors should be bearish about investing in The Walt Disney Company for these reasons:

  • The stock has a relatively high P/E ratio of around 37, which may indicate that it is overvalued compared to its earnings, potentially leading to a price correction.
  • The current ratio of 0.68 suggests that the company may have liquidity issues, as it indicates that current liabilities exceed current assets.
  • Insider ownership is low at 0.16%, which may raise concerns about alignment between management and shareholder interests.
  • The beta of 1.49 indicates higher volatility compared to the market, meaning the stock price may experience larger fluctuations, which could be risky for investors.
  • Recent insider selling, including a transaction where an executive sold shares, could signal a lack of confidence in the stock's short-term performance.

Cinemark Holdings (NASDAQ: CNK) Stock is a Theater Fallout Winner

Written By Jea Yu on 12/23/2020

Cinemark Holdings (NASDAQ: CNK) Stock is a Theater Fallout WinnerMovie theater chain Cinemark Holdings, Inc. (NYSE: CNK) stock is down over (-70%) year-to-date (YTD) compared to the 15.5% performance for the benchmark S&P 500 index (NYSEARCA: SPY). The movie theater business has been ravaged by the  pandemic and the recent announcements of same-day streaming and theater releases of 2021 movies by Disney (NYSE: DIS) and AT&T Warnermedia (NYSE: T). This caused shares to collapse along with peers AMC Entertainment (NYSE: AMC) and IMAX Corporation (NYSE: IMAX) . Further damage in the form of new shutdown mandates for non-essential businesses in the U.S. and U.K. to slow another surge of COVID-19 infections despite the distribution rollout of COVID-19 vaccines already under way. The triple shock has been so severe that competitor AMC filed an emergency offering of up to 178 million shares with a dire warning that without additional liquidity, the Company would deplete existing cash reserves hinting at potential bankruptcy. Surprisingly, AMC’s announcement and subsequent (-17%) stock decline didn’t spread over to Cinemark shares, due to the potential for market share gains by attrition. Prudent investors may watch for opportunistic pullback levels to gain exposure on the new narrative for Cinemark as a fallout survivor as it moves up to the number two spot of the top three largest theater chains.

Q3 FY 2020 Earnings Release

On Nov. 5, 2020, Cinemark reported an earnings-per-share (EPS) loss of (-$1.25) excluding non-recurring items versus consensus analyst estimates for a loss of (-$1.27), a $0.02 beat. Revenues collapsed (-95.7%) year-over-year (YoY) to $35.5 million, falling way short of analyst estimates for $103.6 million. The Company had only 252 U.S. and 15 international theaters open to limited hours showing limited releases and library content. Attendance for the third-quarter was 1.9 million customers with $14.9 million in ticket sales and $9.1 million in concession sales. The Company has launched Private Watch Parties as one of its innovative new ways to maximize revenues. Cineworld plans to open two new theaters and 16 additional screens for the remainder of 2020. The Company ended the quarter with approximately $825.7 million in cash and cash equivalents.

Conference Call Takeaways

Cinemark CEO, Mark Zoradi, emphasized the top priority of maintaining “stringent cash and liquidity management” to weather the unprecedented pressures that have arisen as a result of the COVID-19 pandemic. The pressures include delays in new film content, operating constraints imposed by government regulations, safety protocol expenses and the challenge to demand amid the pandemic. The Company has already sold nearly 50,000 private launch party events where more than 600,000 people have attended to date with “a significant portion reporting it was their first time back in the theater since the shutdown”. These are more than covering the incremental costs of theater operations including film rental, concession costs, janitorial, hourly payroll, cleaning and janitorial services. During the period of low demand, the Company has limited concessions to the “highest value core offerings that require less labor to fulfill and have less risk of spoilage.” The Company has permanently closed 21 underperforming theaters, trimmed corporate staff and continues negotiations with landlords for rent abatement and contractual payment deferrals and modifications. The Company also raised $250 million in new five year senior secured notes. The Company also netted approximately #390 million of incremental liquidity on five year convertible senior notes and $116 million of tax refunds from the CARES Act with another $100 million plus in refunds expected. This resulted in $825.7 million in global cash balance. The monthly normalized cash burn rate “is approximately $50 million per month.”, according to Cinemark CFO, Sean Gamble. The Company expects fourth-quarter burn rate to rise to $75 million per month due to the timing of bi-annual bond interest payments, phased settlement of rent deferrals and incremental interest payments from the recent debt raises. Cash burn rate is expected to fall to $65 million per month over the course of 2021. At the end of October, the Company had approximately $750 million in cash enabling a cash run rate that extends into Q4 2021 and into 2022 with the new tax refunds expect by Q2 2021.

Largest Theater Chains

AMC is the world’s largest theater chain with 636 locations and 8,094 screens followed by Cineworld with 549 locations and 7,211 screens and Cinemark has 533 locations with 5,974 screens. Cineworld has clearly managed it cash and liquidity better than AMC. The rollout of COVID-19 vaccines will eventually improve sentiment and pent-up demand for out-of-home entertainment. The plunder goes to the survivors of the movie theater fallout and Cinemark has enough cash to survive into Q4 2021, Prudent investors can look for opportunistic pullbacks to gain exposure.

Cinemark Holdings (NASDAQ: CNK) Stock is a Theater Fallout Winner

 CNK Opportunistic Pullback Levels

Using the rifle charts on the monthly and weekly time frames enables a broader view of the playing field for CNK stock. The monthly rifle chart is attempting a stochastic divergence bottom to cross up through the 20-band as the monthly 5-period moving average (MA) is sloping up targeting the monthly 15-period MA near the $19.72 Fibonacci (fib) level. The monthly market structure low (MSL) buy triggers above $16.02. The weekly rifle chart has recovered the 5-period MA as stochastic nears the 80-band for a potential mini pup towards the $19.72 fib and monthly 15-period MA or a cross down to provide opportunistic pullback levels at the $$15.33 fib, $13.97 weekly MSH, $12.50 fib and the $11.01 fib. The upside trajectories range from the $20.95 fib up to the $34.46 fib.

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