Michael Morris on Disney's Mixed Quarter and Streaming Strategy

Disney's Latest Financial Performance

• 🎯 Disney shares experienced a decline following a mixed financial quarter, with the company beating on the bottom line but slightly missing revenue expectations.
• ⚠️ The entertainment unit showed growth, primarily driven by streaming, but overall performance and outlook were seen as just meeting expectations rather than exceeding them.

Key Business Uncertainties

• 🎢 Investors are concerned about two major segments: the experiences segment (theme parks, etc.) due to consumer spending trends, and the entertainment segment.
• 📺 Within entertainment, the primary concern is whether the direct-to-consumer (DTC) business can grow fast enough to offset declines in the traditional media business.

Direct-to-Consumer Strategy

• 💡 Disney's DTC strategy relies heavily on bundling services like Disney+, ESPN, and Hulu at a lower price point.
• 📈 Early signs suggest bundling leads to longer subscription lifespans and lower churn, but the success of the new ESPN product and overall revenue/profit acceleration remains to be proven.

Streaming Growth and Valuation

• 💰 Michael Morris believes Disney stock is currently undervalued, trading at a significant discount to the market.
• 📊 While the company has set targets for operating income, the growth of the streaming business has not been as robust as desired, especially when compared to competitors like Netflix.
• 🔍 There is a need to see improved performance in the streaming segment to justify a premium valuation for this high-growth business.