Hey everyone.

Welcome to our Opportunity Mining section.

The company we'll dive into this week is Walt Disney Co. (NYSE: DIS).

The company made its name with so many well-known animated characters like Mickey Mouse and Donald Duck.

The media empire struggled in 2022, and its stock underperformed the market.

However, since late 2022, Disney made headlines multiple times as its former CEO Bob Iger returned to the helm and David Tepper, a billionaire hedge fund manager, reinvested in the company.

Are these signs of a turnaround?

01 Business Model

The Walt Disney Company is a diversified media conglomerate operating media networks, theme parks, film and TV studios, and direct-to-consumer streaming services.

The company breaks down its revenue into two segments: Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences, and Products (DPEP).

In the Fiscal year 2022, the company generated a total revenue of US$83.7 billion and an operating income of US$12.1 billion.

Here's Disney's revenue breakdown for FY 2022:

02 Strength

Theme parks are the backbone of Disney's business.

The company has 12 theme parks and 53 resorts in the United States, Europe, and Asia.

Revenue comes mainly from theme park admissions, food, beverages, merchandise, resort and vacation stays, and royalties from intellectual property licensing.

According to the FY23Q1 earnings report, Disney parks contributed only 37% of the total revenue but 100% of the operating income. In other words, all of Disney's profits in the last quarter came from theme parks.

Theme park businesses are considered to have a relatively wide moat due to the high entry-level barriers as developing a new theme park requires a major capital investment.

The amusement industry is dominated by a few players. Disney is one of the global leaders in this business.

03 Growth Potential

The streaming business has been Disney's growth driver in recent years.

Since October 2020, the company has focused on accelerating the growth of its Direct-to-Consumer (DTC) strategy.

Disney's Direct-to-Consumer (DTC) segment is composed of all streaming services, including Disney+; Disney+ Hotstar; ESPN+; Hulu; and Star+.

According to data collected by Visual Capitalist, as of Q2 2022, Disney's streaming empire (Disney+, Hulu, and ESPN+) has more subscribers combined than Netflix and is gaining at a rapid pace.

04 Earnings Highlights

On February 8, 2023, Disney reported fiscal 2023 first-quarter earnings that beat analysts' estimates.

Revenue grew 8% year-over-year to US$23.51 billion, compared to Refinitiv's estimate of US$23.37 billion.

Excluding certain items, diluted EPS for the quarter was US$0.99, higher than Refinitiv's estimate of US$0.78.

What's more, the company announced a strategic restructuring plan, including reorganizing its businesses into three segments, cutting 7,000 jobs, and slashing US$5.5 billion in costs.

The move marks the most significant action Bob Iger has taken since returning to the company as CEO in November.

Investors hope that the plan will help Disney to deliver solid growth and profitability in the future.

05 Important Events

The year 2022 has been the worst year for Disney since 1974, as its share price dropped by more than 40%.

However, some big news came in late 2022, reigniting investors' hope that the company is back on track to the Magic Kingdom.

Here is a timeline of some important events:

In November 2022, Bob Iger returned as the CEO of Disney. During his 15 years as CEO, from 2005 to 2020, Bob Iger helped build Disney into one of the world's most successful media and entertainment companies.

In January 2023, activist investor Nelson Peltz launched a proxy fight with Disney, pushing him to gain a seat on the board. An activist investor is a shareholder who uses an equity stake in a corporation in order to change how it is run.

On February 09, 2023, Disney announced a reorganization plan. Shortly after, Nelson Peltz declared Disney proxy fight was over.

On February 15, 2023, according to SEC 13F filings, the billionaire investor David Tepper initiated a new position at Disney in Q4 of 2022. Tepper’s Appaloosa Management now owns 300,000 shares of Disney. David Tepper is known as one of the best hedge fund managers of his generation.

06 Risk

More intense competition in the streaming business  

The streaming business is highly competitive. Disney's major rivals, including WarnerMedia’s HBO Max, ViacomCBS’s Paramount+, NBCUniversal’s Peacock, Apple and Amazon, are all investing heavily in content.

Disney's DTC segment posted a revenue of US$5.3 billion in Q1 FY 2023, up 13% from the same three-month period a year ago. However, the segment reported an operating loss of US$1.1 billion due to a higher loss at Disney+.