Entertainment is one necessary feature that has played a major role in ensuring humans live both a normal and happy life for centuries. Due to this, the entertainment industry is highly competitive even if it offers a wide range of media that enables businesses to choose their content operation from. Apparently, there has been continuous dynamic shift from old media to new one and it is expected to progress further. In the future, internet is predicted to be one of the major platforms that will help in delivering content.
The Walt Disney Company and their subsidiary is an entertainment company recognized worldwide for its business operation in four major segments. That is, media network, studio entertainment, parks and resorts and consumer products & interactive media. The company was started on October 16, 1923 by siblings Walt Elias Disney and Roy Oliver Disney as Disney Brothers Cartoon Studio. Since then the company function under different names until in 1986 when it finally settled for the name The Walt Disney Company. It has established its operation to be one of the leading American entertainment company and has been listed among the DOW top index since 1991.
The company believes in its mission of entertaining, informing and inspiring people around the world through telling stories, mind creativity, inventing new technology and iconic brands reflection. By following this as a our bank’s fund manager, I intend to use all the information I will obtain to write a research paper that will help analyze if investing our $25 million dollars in the stock of The Walt Disney Company will be of benefit.
Business Strategy Analysis
The Walt Disney Company is one of the leading entertainment enterprises and it has been able to establish its position through competitive strategy. It utilizes well the fact that they offer unique product in studio entertainment, media enterprises and park and resort that sets them apart from their competitors. In 2019 the corporation’s fiscal sales was $257 billion. Through using differentiation as their competitive strategy, the company boasts of approximately 223,000 employees as of September 28, 2019. It is able to offer its products to most of the nations globally.
The corporation focuses on creating new product especially those that trends globally in the market. It draws its customers by diversifying in the market and it has done this since its inception. By innovating and creating the products in high demand the company is able to grow and compete awesomely against its immediate competitors. For instance Time Warner Media, CBS, Sony, Viacom and Comcast Corporations are among the major competitors of The Walt Disney Company in the entertainment industry.
The company places importance on creating family based programming. The company’s subsidiary The Walt Disney Imagineering Research and Development Inc. ensures that its team provides entertainment in their amusement parks and resorts in a unique manner. These differences offers the company competitive advantage against their competitors and hence this enhance its growth in the industry. Also the company has established the image of its brand well not to mention its networks. All of the above have been able to create a positive influence on its target market and enable the company to stand tall against its competitors.
The Walt Disney Company has adopted different accounting practices that they publish in their 8-k filings with the SEC. The form discloses the company’s financial status and its operations for public reviewing. By thoroughly inspecting it, I have discovered that the accounting practices adopted by the company generally reflect an accurate picture of the economic performance.
As detailed in their April 10, 2020 8-k fillings the company’s accounting terms are constructed according to GAAP. The Walt Disney Company financial statement follows the rules and requirements of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants. It follows the guidelines which entail offering qualitative statement that shows all the company’s accounting practices, definitions and they also evaluate the principles of accounting.
The company publishes its 8-k filing report regularly to inform the public of any changes in its financial statement. This is important to the company’s investors and those planning to invest their stock in the company. Therefore financial statements are recorded and the required adjustments made whether they are good or bad as per SEC requirements. This helps protect the investors from deceptive transactions, integrity in the company’s target market is also sustained. Most importantly by following the pertaining rules the United States economy expansion is enabled.
It is evident that the company’s financial statement is not of any dubious value. I have reviewed all the public announcements I could find and have not found any statement indicating the company has untruthful financial statements. The company’s 8-k form details all the assets available, the interest rates offered, advances, taxes payment, investments, cash flow rates transparently.
There is also a record indicating that the value of shares has reduced due to the covid-19 pandemic as compared to the last 8-k form published. Additionally as the company follow the regulations of auditing companies; it therefore meets the established business standards required. By doing this it increases the value of the information detailed in the 8-k published form. Due to this The Walt Disney Company is one of the corporations in the entertainment industry recognized for its transparency by the public and supported by the company’s management and its directors.
Forecasting is an essential part in every business since it provides hindsight to the management on ways of planning and funding their projects within the enterprise. If done accurately it could have a major impact on the company. From the Walt Disney Company’s financial ratios analysis I discovered that their valuation is way higher than the market’s valuation of its competitors. I analyzed my financial ratios using the company’s 2019 annual report to regard their performance. Therefore before making the decision of investing our firm’s $25 million I had to review different prospects of various analysts concerning the Walt Disney Company.
According to Forbes, the company’s number of shares in 2019 increased to 1.7 billion as compared to the previous year 2018 where it was at 1.5 billion. This was a34% increase in the price of stock. This happened mainly since the company’s revenues were higher. The launching of the Disney+ together with the price-to-earnings expansion also contributed to increase. Additionally, the growth in its sales in 2019 happened when the company acquired 21st Century Fox and consolidated operations of Hula.
On the other spectrum the company’s net income in 2019 decreased by $1.5 billion in FY in spite of the great growth in their revenue. The net income in 2018 was $12.6 billion in FY whereas in 2019 it was $11.i billion in FY. The company expects the Disney+ to grow and is predicted in the future to pose a great competition to both Amazon and Netflix. The streaming service Disney+ is projected to be the company’s base revenue in 2020.
Many analysts are concerned about the lack of originality of the streaming services and it is something that does not get investors excited. As compared to its competitor Netflix whose stock has dropped by -4%, according to Forbes, the Walt Disney Company’s stock has dropped by -38% due to covid-19 pandemic. Its amusement parks have been closed down contributing to the dropped as it contributes to 35% of its entire revenue.
It also faces challenges in studio entertainment segment as it has experience several disruption in concern to their operations. Market watch paper details that Walt Disney Company faces risk more than other entertainment companies as more of its operation are connected. Despite the mentioned challenges the company is expected to regain its market value although it might not be instant. Number of shares is expected to drop but later rise again after the company stabilizes.
The Walt Disney Company has established its name in the entertainment industry through its aptitude to compete effectively among its peers. The company since its inception has always put its customers’ needs first. It offers unique product to its target market globally. The company is stable enough to pay all its liabilities and overhead expenses with ease without incurring challenges as per its quick ratio. It adheres to the guidelines put in place by SEC and Financial Accounting Standard Boards while dealing with financial statements. Generally, the Walt Disney Company is a respectable enterprise with good management that guides it to more promising future.