The Walt Disney Company

DIS Details

June Quarter Result Highlights: The Walt Disney Company (NYSE: DIS) is a leading entertainment company that works in four main business segments: Media Networks, Studio Entertainment Parks and Resorts, and Consumer Products & Interactive Media. For the quarter ending 27 June 2020, the company reported total revenue of $11,779 million, down by 42% year over year, mainly due to the impacts of COVID-19 pandemic. Notably, the company witnessed an impact of $3.5 billion on operating income at its Parks, Experiences and Products segment due to revenue lost as a result of the closures. Despite the challenges presented by the pandemic, the company progressed with its Disney+ streaming platform and exceeded the milestone of 100 million paid subscriptions. For the quarter, the company reported a diluted loss per share of $2.61 as compared to income of $0.79 per share in the prior-year quarter.

June 2020 Quarter Highlights (Source: Company Reports)

What to expect: Currently, the company’s top priority is to advance and grow its direct-to-consumer business. The company is continuing its international expansion with the launch of Disney+ in the Nordics, Belgium, Luxembourg, and Portugal in September and in Latin America this November. In 2021, the company is planning to launch an international direct-to-consumer general entertainment offering under the Star brand.

Key Risks: The COVID-19 pandemic has already impacted several businesses of the company. Any escalation in the pandemic and associated restrictions could further affect entertainment, travel, and leisure businesses generally and may also impact the performance of the company’s theatrical and home entertainment releases. Further, the company is exposed to the risks associated with changes in domestic and global economic conditions, competitive conditions, and consumer preferences.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of DIS has provided a return of 26.42% in the past six months and is inclined towards its 52 weeks high price of $153.41. On the technical analysis front, the stock has a support level of ~US$129.4 and a resistance level of ~US$146.97. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). For the purpose, we have taken peers like ViacomCBS Inc (NASDAQ: VIAC), News Corp (NASDAQ: NWSA), Netflix Inc (NASDAQ: NFLX). Considering the increasing subscriptions of Dysney+ platform, its international expansion and the company’s growing direct-to-consumer business, we give a “hold” recommendation on the stock at the closing price of $133.36, down by 0.63% on 9 September 2020.

DIS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Walmart Inc.

WMT Details

Eying for a relationship with TikTok US: Walmart Inc. (NYSE: WMT) is a world’s leading retailer, operating around 11,500 stores under 56 banners in 27 countries and eCommerce websites in 10 countries. Recently, the company issued a statement wherein it disclosed that it is in discussion with Microsoft for developing a potential relationship with TikTok US. This relationship could help WMT to reach and serve omnichannel customers as well as grow its third-party marketplace and advertising businesses.

Other Key Updates:  The company recently started offering convenient flu shots at its pharmacies, to make the lives of its customers better and easier. In another update, the company also launched a membership program - Walmart+, under which the customers get several benefits, including unlimited free delivery, Scan & Go facility, and fuel discount. The company also unveiled the list of Hottest Toys of the 2020 Holiday Season. Frozen 2 -Magic in Motion Elsa Doll was at the top of the list. Further, WMT and Thrive Global have joined hands to help Walmart associates and customers make better choices and achieve healthier behavior changes. The collaboration has re-launched the Thrive ZP Challenge and has increased the prize pool money to $1 million.

Q2 FY21 Result Highlights: During Q2FY21, the company witnessed increased demand for products across multiple categories. As a result of this, the company’s total revenue grew by $7.4 billion to $137.7 billion, as compared to pcp. During the quarter, the company witnessed decent sales growth in Walmart U.S. comp and Walmart U.S. eCommerce businesses. The company’s adjusted operating income (in constant currency) stood at $6.6 million, up 18.6% on pcp. The company ended the quarter with increased cash and cash equivalent of $16,906 million, as compared to $9,283 million in pcp.

Q2FY21 Result Highlights (Source: Company Reports)

Decent Liquidity Level: The increased cash balance at the end of June quarter is providing enhanced financial flexibility to tackle the uncertainties related to the COVID-19 pandemic. The company believes that it has enough liquidity to fund its operations, finance its global investment and expansion activities, pay dividends, and fund its share repurchases for the foreseeable future.

Key Risks: The COVID-19 pandemic and related governmental actions pose a huge threat to the company as it could adversely affect the company’s business, results of operations, financial condition, or liquidity in the future. Further, the company is exposed to several operational risks associated with geo-political and catastrophic events.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: Over the last six months, the stock of WMT has provided a return of 22.24% and is inclined towards its 52 weeks high price of $151.33. This suggests that the stock might have factored in most of the positives of the company. On the technical analysis front, the stock has a support level of ~US$129.32 and resistance level of ~US$141.93. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with a correction of high single-digit (in % terms). For the purpose, we have taken peers like Costco Wholesale Corp (NYSE: COST), Target Corp (NYSE: TGT), Dollar General Corp (NYSE: DG). Considering the aforesaid facts, and the company’s current trading levels, we suggest investors to wait for better entry level and hence, give an “Expensive” rating to the stock at the closing price of $139.89, up 1.04% on 9 September 2020. 

WMT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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