Monday, 23 September 2019 11:27 GMT

Disney: Should You Buy the Post-Earnings Dip?

(MENAFN - Disney (NYSE:DIS) stock was up 1.16% in mid-afternoon trading on August 19. Shares have dropped 6.3% over the past month. The company released its third quarter 2019 results on August 6.

There has been considerable excitement swirling around Disney as it prepares to launch its streaming service, Disney+, later this year. Thus far, this service looks to present the most formidable direct competition to Netflix (NASDAQ:NFLX) we have seen. It boasts a massive trove of the most popular content in entertainment.

The costs ahead of this launch weighed on Disney in Q3 2019. Revenue came in at $20.25 billion which fell below analyst expectations, while adjusted earnings per share came in at $1.35.

Disney worked to integrate 21st Century Fox assets over the course of the quarter with its focus still on the streaming launch. The company estimated that the acquisition had a dilutive impact to earnings per share of $0.60, which was more than anticipated.

During the earnings call, Disney revealed that it will offer a bundle of its ESPN+, Disney+, and ad-supported Hulu programs for $12.99 per month. The basic Disney subscription will come at a price of $6.99. That low price will work to undercut its competitors as the battle heats up into the next decade.

Disney's studio entertainment segment posted 12% earnings growth year-over-year to $792 million. An improved film slate, including the now top box office release of all-time, Avengers: Endgame, helped to bring it back around from a disappointing Q2.

Shares of Disney boast a P/E ratio of 25 at the time of this writing. I still like Disney ahead of its streaming launch and expect a bounce back after incurring acquisitions costs in this quarter.


Disney: Should You Buy the Post-Earnings Dip?

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