Walt Disney Co

Walt Disney Co (NYSE: DIS) is a diversified family entertainment and media enterprise.

On 12 August 2021, DIS is likely to announce its Q3 FY21 results.

Investment Highlights – HOLD at USD 178.74

• Walt Disney witnessed encouraging signs of recovery across all businesses in Q2 FY21, and it is ramping up operations to fuel long-term growth for the Company.
• In Q2 FY21 versus Q2 FY20, DIS reported a 95% increase in net income from continuing operations and a 92% increase in diluted earnings per share from continuing operations.
• The progressive vaccine roll-out shall support the demand and economic recovery.
• DIS’s stock price has given a remarkable return of around 51.98% in the past year, showing outperformance against the benchmark NYSE index.
• From a technical standpoint, 14-day RSI (29.43) is in the oversold territory, while the stock price is hovering below the lower standard deviation of the Bollinger Bands.

Key Risks

• The resurgence in Covid-19 cases can reduce capacity at Disney Parks and cruise ship sailings. Moreover, it can incur additional costs for implementing safety measures.
• The macroeconomic instabilities, inflationary pressure, and subdued demand can impact the Company’s growth prospects.

Q2 FY21 Results for six months ended 3 April 2021 (as on 13 May 2021)

 (Source: Company Website)

• Due to the Covid-19 impact on Disney Parks, Experiences and Products segment, EPS from continuing operations for H1 FY21 decreased 64% year-on-year.
• In Q2 FY21, revenues from Linear Networks and Domestic channels fell 4% each year-on-year.
• Similarly, increase advertising revenue and lower programming led to 27% year-on-year (in Q2 FY21 versus Q2 FY20) decrease in operating income of International Channels.
• On the other hand, revenues from the Direct-to-Consumer segment reported a 59% year-on-year increase in revenue in Q2 FY21.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative) 

Conclusion

The reopening of theme parks and resorts continued success of streaming services, and increased production at studios are underpinning an encouraging sign of recovery for fuelling long-term growth. Although short-term uncertainties cannot be ruled out, the Company has diverse portfolio of assets to navigate the challenging period. It also has multiyear sports rights deals for ESPN to remain resilient. The stock made a 52-week high and low of USD 203.02 and USD 113.37, respectively.

Based on the operational achievements, resilience financials, signs of recovery, supported by the valuation conducted above, we have given a "HOLD" stance on Walt Disney Co at the closing market price of USD 178.74 (as of 26 July 2021), while we look to fresh buying when short-term uncertainty fades away.

Amneal Pharmaceuticals Inc

Amneal Pharmaceuticals Inc (NYSE: AMRX) is a Pharmaceutical Company focusing on generic and specialty drug products.

On 9 August 2021, it has scheduled the announcement of its Q2 FY21 results.

Investment Rationale – WATCH at USD 4.83

• In Q1 FY21 versus Q1 FY20, AMRX reported
  • A decline in revenue due to decreased influenza activity.
  • Significantly reduced net income and adjusted EBITDA, primarily driven by a discrete tax benefit and higher investments.
• On 19 July 2021, AMRX received approval for Generic TobraDex® from FDA, which shall add another complex ophthalmic product to the generic portfolio.
• On 17 June 2021, AMRX unveiled that the US Food and Drug Administration (FDA) has accepted ‘Bevacizumab’ for reviewing its Biologics License Application.
• From a technical standpoint, AMRX’s stock price is trading below the 20-day EMA (USD 5.16), indicating a bearish price momentum.
• Over the past five years, profitability margins (gross margin, operating margin, and net margin) have remained below the industry median.
  

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on the lossmaking history, bearish price momentum, macroeconomic uncertainties, and recent FDA approvals, we have given a “WATCH” recommendation on Amneal Pharmaceuticals Inc at the closing market price of USD 4.83 (as of 26 July 2021).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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