AT&T Thinks Time Warner Should Focus On Mobile-Friendly Content - Market Realist

The Hidden Opportunities in AT&T's Acquisition of Time Warner
The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 1 OF 15
AT&T Thinks Time Warner Should Focus on

Mobile-Friendly Content
By Shirley Pelts | Jun 30, 2017 1:30 pm EDT
Rise in mobile viewing content

As media companies in the United States (SPY) seek to make inroads internationally with
their video streaming services, theyre faced with the problem of a weak Internet ecosystem.
In these circumstances, media companies are increasingly trying to provide mobile-friendly
content. In developing countries such as India (EPI), slow broadband speeds and limited
access to the Internet have resulted in viewers switching to viewing content on mobile
devices.
AT&T (T) is thus looking to provide mobile-friendly content after its proposed acquisition of
Time Warner (TWX) gets approved. AT&T stated at the JPMorgan Technology, Media &
Telecom Conference in May 2017 that its looking at curating Time Warners content and
making it more mobile-friendly.
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Even video streaming company Netflix (NFLX) is looking at video streaming on mobile as it
rapidly expands internationally.
Rise in mobile video trac

Theres rising evidence to support the trend of making content more mobile-friendly.
According to Cisco Systems (CSCO) VNI (Visual Networking Index), video will comprise
77.0% of all mobile data trac in 2020 in the United States (SPY).
Considering these statistics and as media companies look internationally for expansion,
mobile-friendly content could be the way to go.
What Are AT&Ts Plans for Time Warner in

Terms of Advertising?
AT&Ts advertising plans

For media companies such as Time Warner (TWX), advertising is a key component of its
revenues. As a result, Time Warner is increasingly focusing on targeted advertising, which
uses viewership data to provide advertising thats targeted at a particular audience
demographic and caters to their tastes.
AT&T (T) indicated at the JPMorgan Technology, Media & Telecom Conference (JPM) in May
2017 that it was looking to access viewership data collected from its DirecTV pay-TV
business and its video streaming service DirecTV Now and using it for Time Warners ad-
supported services.
AT&T also pointed out that Time Warners Turner networks had an advertising inventory of
750 billion ad impressions each year. In contrast, AT&Ts pay-TV and mobile business
together have ad impressions of 200 billion each year.
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AT&T further said that the rate at which it monetizes its ad impressions is approximately two
to three times that of a media company. Thats due to the companys viewership data. The
company also said that with Time Warners proposed acquisition, the combined company
would collectively have an ad inventory of 1.0 trillion ad impressions each year.
TWXs focus on targeted advertising

Earlier this year, Time Warner launched the OpenAP platform along with Viacom (VIAB) and
Twenty-First Century Fox (FOXA). With OpenAP, Time Warner intends to provide a unifying
platform to its advertisers where advertisers can use the viewership data for advertising on
linear television networks.
Time Warner is also increasingly looking at selling viewership data to its advertisers instead
of the traditional ad inventory at the upfronts. By 2020, the company intends to do around
50.0% of its advertising business based on such audience-based deals.
How AT&T Views the Time Warner

Opportunities
AT&Ts rationale behind acquiring Time Warner

AT&Ts (T) decision to acquire Time Warner (TWX) has mainly been driven by Time Warners
premium content. AT&T reiterated this at the JPMorgan Technology, Media & Telecom
Conference (JPM) in May 2017. The company said that Time Warner has a vast library of
content, which, combined with AT&Ts content distribution business through pay-TV and
mobile, could lead to it being a leader in the media industry.
AT&T also pointed out that Time Warners Turner business has three of its television network
brands in the top ten, while four are among the top 20 network brands. According to Time
Warner, around 85.0% of its aliate fees come from four of its top network brands, while
90.0% come from its top five network brands.
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AT&T said that considering these statistics and TWXs strong sports programming, it
strongly believes in Time Warners content portfolio. The company also said that TWXs
content portfolio presented an exciting opportunity for the company to curate Time Warners
content for digital distribution.
Rising popularity of online television services

Streaming videos is increasingly popular among viewers. According to a TiVo (TIVO) 4Q16
Video Trends report, Netflix (NFLX) continues to remain a leader in the video streaming
services market with a ~53.0% market share, followed by Amazon (AMZN) Prime Instant
Video service with a 26.3% market share.
A major reason viewers are preferring to watch content online is because viewers have to
pay around $100 or more each month to watch cable programming, and online viewing of
content is much cheaper, with Netflix plans starting at $7.99 per month.
Why the AT&TTime Warner Proposed

Merger Still Faces Opposition
Senator opposes AT&TTime Warner merger

AT&Ts (T) proposed acquisition of Time Warner (TWX) continues to run into opposition.
According to a Broadcasting & Cable report, citing a letter from U.S. Senator Susan Collins
of Maine, the senator expects the proposed merger to have a significant, negative impact
on competition and innovation.
The report also said that while Collins didnt directly oppose the merger, she did ask the
DOJ (United States Department of Justice) to carefully review the merger.
There have been concerns from the start that the merger could hamper competition, but
AT&T has always maintained that its a vertical integration for the company and as such is
unlikely to aect competition in the media industry.
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Currently, AT&T is struggling to attract customers in the wake of increasing competition from
Sprint (S) and T-Mobile (TMUS). Its proposed acquisition of Time Warner could enable the
company to diversify its revenues.
Why AT&T believes the merger is a vertical integration
AT&T believes the acquisition of Time Warner is a vertical integration since it would combine
Time Warners premium content with AT&Ts distribution network, including its wireline,
wireless, and pay-TV business.
AT&T also expects that its proposed merger with Time Warner will likely have less
opposition since it believes that the regulatory environment has significantly improved over
the past six months. The company also believes that TWXs business is less regulated
compared to most of AT&Ts traditional business activities.
Why Time Warner Is Focusing on Short-

Form Content
Time Warners deal with Snapchat

As streaming of videos on mobile phones becomes increasingly popular, media companies
such as Time Warner (TWX) are also taking a closer look at content. Thats because short-
form content on mobile devices is more popular. It has led to Time Warner looking at
programming that can appeal to all demographics and include short-form content, scripted
content, and content in the local language internationally.
Considering the popularity of messaging applications such as Snapchat (SNAP), Time

Warner is also looking at producing original content for Snapchat. Earlier this month, the
Wall Street Journal reported that the two companies entered into an agreement in which
Time Warner will produce around ten original shows each year for Snapchat.
According to the report, the deal is worth $100.0 million. Time Warners original content for
SNAP is most likely to be short-form content.
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AT&T has also made it clear that if its proposed acquisition of Time Warner is approved, the
company intends to curate TWXs content to make it more mobile-friendly.
Popularity of short-form content

According to ReportLinker data from earlier this year, the average household in the United
States (SPY) has 7.3 screens. It indicates the rising ownership of digital devices in the
United States. The data also showed that while 93.0% of US households own a television,
other digital devices continue to be popular with ownership of smartphones, laptops, and
tablets at 79.0%, 78.0%, and 68.0%, respectively.
How AT&T Could Benefit from Time

Warners Digital Properties
TWXs CNN network under fire

Time Warners (TWX) CNN network has been under fire recently over the networks story
regarding a link between President Trumps associate, Anthony Scaramucci, and an
investment fund in Russia. CNN later retracted the story. On June 27, 2017, theThe New
York Post reported, citing unknown sources, that CNN retracted the story amid fears of a
possible libel suit by Scaramucci.
According to the New York Post report, CNN president Je Zucker was afraid that a libel suit
would be negative for Time Warner since AT&Ts (T) proposed acquisition is still under
review by the DOJ (United States Department of Justice) (SPY).
There has also been widespread speculation that Zucker is unlikely to be retained if AT&Ts
proposed merger with Time Warner is approved.
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Time Warner is optimistic about CNNs digital network and expects that it could earn more
revenues in another five years than CNNs television network.
Time Warners digital properties

Time Warners digital properties include CNN digital network, Bleacher Report, and websites
such as tntdrama.com, TBS.com, adultswim.com, and cartoonnetwork.com. If AT&Ts
proposed merger with Time Warner is approved, AT&T intends to use its detailed viewership
data for TWXs digital properties not only to understand viewer preferences in terms of
content but also for advertising and marketing services.
When it comes to Time Warners Bleacher Report, it considers it a valuable digital property
since its extensive soccer and MMA (mixed martial arts) coverage is followed by millions of
fans around the world.
Why Time Warners Franchise-Focused

Strategy Could Work for AT&T
Wonder Woman works wonders for Warner Bros.

Time Warners (TWX) Wonder Woman movie is working wonders at the box oce. According
to a June 27, 2017, Forbes report, Time Warners Wonder Woman has earned $321.2 million
since its release at the US (SPY) box oce. In contrast, according to other reports, The Walt
Disney Companys (DIS) Cars 3 has brought in $141.3 million at the global box oce since
its release around two weeks ago.
Earlier this month, Barrons predicted that the success of the Wonder Woman movie could
boost Time Warner stock by around 20.0% over the coming year. Wonder Woman belongs
to Time Warners DC Comics franchise and had the third-largest opening for this franchise.
Time Warner is also set to release another movie from the DC Comics franchiseJustice
Leagueand two console games later this year. It will release 17 movies from its DC
Universe, Lego, and World of Harry Potter franchises between 2016 and 2020.
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AT&T could stand to benefit from the success of Wonder Woman

Time Warners Warner Bros. is following a franchise-focused strategy when it comes to its
movies, similar to Disney. The success of Warner Bros. Wonder Woman movie could
reassure AT&T that the Warner Bros. franchise-focused strategy is following the right path to
success. AT&Ts viewership data could also give insight to Warner Bros. about which
movies to produce that would have a successful run at the box oce.
As a result, it could help Warner Bros. monetize its franchises more eectively.
Why Hulus Online TV Service Could Be a

Money-Spinner for AT&T
Hulus online television service

Time Warner (TWX) has a 10.0% stake in Hulu, a video streaming service. Hulu is jointly
owned by The Walt Disney Company (DIS), Twenty-First Century Century Fox (FOXA), and
Comcast (CMCSA). On June 23, 2017, MediaPost reported, citing MoettNathanson
Research, that Hulus online television service could earn around $71.1 million in advertising
revenues and $568.3 million in fees from subscribers to its service. Thats a total of around
$600.0 million in revenues.
According to the report, $600.0 million in revenues was only possible if Hulus online
television service could sign up 1.2 million subscribers.
Time Warner has already licensed its content to Hulus online television service and sees a
revenue growth opportunity in the rise of these services. According to the company, the rise
in online television services indicates that the demand for cheaper skinny bundles with
quality content is on the upswing.
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How AT&T is likely to benefit from Hulu

Time Warner believes there is a content licensing opportunity in the rise of these services.
Since AT&T has proposed to acquire Time Warner, the acquisition, if approved, could
result in higher content licensing revenues for AT&T. The acquisition could also result in
AT&T using its distribution platform to market Hulus online television service in a better way.
Its also possible that AT&T could use its viewership data to provide more targeted
advertising on Hulu, resulting in more advertising revenues for the online television service.
A Look at Time Warners Financial Metrics

Time Warners debt-to-capital ratio

As of June 28, 2017, Time Warner (TWX) had a total debt of $23.2 billion on its balance
sheet with total capital of $48.6 billion. The company has a total debt-to-capital ratio of
50.0%. In contrast, Time Warners peers Comcast (CMCSA), Twenty-First Century Fox
(FOXA), and The Walt Disney Company (DIS) have debt-to-capital ratios of 51.0%, 56.0%,
and 30.0%, respectively.
Time Warner had a leverage ratio of 2.6x at the end of fiscal 1Q17, which was below its
target leverage ratio of 2.8x. It expects its leverage ratio to decline further by the end of this
year since its discontinuing its share repurchase plan in connection with AT&Ts (T)
proposed acquisition of Time Warner.
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Time Warners other financial metrics
Time Warners debt-to-assets, debt-to-equity, and debt-to-EBITDA (earnings before interest,
tax, depreciation, and amortization) ratios are 0.40x, 91.3x, and 2.73x, respectively. Time
Warner has an EBIT (earnings before interest and tax)-to-interest multiple of 23.3x.
The company also expects its adjusted operating income to rise in the high single digits
this year, based on current exchange rates. However, in fiscal 2Q17, Time Warner expects
its adjusted operating income to fall for both Turner and the company as a result of rising
programming costs and its investment in Boomerang, its SVOD (subscription video on
demand) service.
What Are the Valuation Metrics for Time

Warner?
Time Warners valuation metrics

Valuation metrics include PE (price-to-earnings) multiples and EV (enterprise value)
multiples. Time Warner (TWX) has a forward EV-to-EBITDA (earnings before interest, tax,
depreciation, and amortization) ratio of 10.5x and a forward PE multiple of 15.2x.
In contrast, Time Warners peers The Walt Disney Company (DIS), Twenty-First Century Fox
(FOXA), and Comcast (CMCSA) have forward PE multiples of 15.5x, 13.2x, and 17.8x,
respectively. It indicates that Time Warner is undervalued among its peers on a PE multiple
basis.
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Time Warner had free cash flow of $1.4 billion in fiscal 1Q17 and an EV of $98.8 billion as of
June 27, 2017. Time Warner had an EV-to-FCFF (free cash flow to the firm) multiple for the
trailing one year of 20.1x on June 27.
Price movement for Time Warner
Time Warner stock closed at $99.31 on June 27. It has risen 52.4% in the past year with a
trailing one-year return of 43.5%. In contrast, TWXs peers The Walt Disney Company,
Twenty-First Century Fox, and Comcast stocks have risen 0.70%, 4.6%, and 25.0%,
respectively.
How Wall Street Analysts Are Rating Time

Warner
Time Warners moving averages

On June 27, 2017, Time Warner (TWX) stock closed at $99.31. Its trading at 1.3% above its
100-day moving average of $98 and 0.30% above its 50-day and 20-day moving averages
of $99 each.
In contrast, Twenty-First Century Fox (FOXA) is trading 7.9% below its 100-day moving
average of $30. Comcast (CMCSA) is trading 0.60% above its 100-day moving average of
$39, and The Walt Disney Company (DIS) is trading 4.2% below its 100-day moving average
of $110.
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Analyst recommendations for Time Warner

A majority of analysts continue to rate Time Warner a hold. Of the 31 analysts covering the
company, 11 are bullish on the company, rating it a buy, 19 have rated it a hold, and only
one has rated it a sell.
Analysts have set a target price of $106.03 for the company with a median target price
estimate of $107.50.
Currently, Time Warner is trading at a discount of 8.0% to its median target price.
How Time Warners Technical Indicators

Compare to Its Peers
Technical indicators for Time Warner

Time Warner (TWX) has a 14-day RSI (relative strength index) of 50. It indicates that the
stock is leaning toward being overbought. An RSI above 70 shows an overbought stock,
and an RSI below 30 indicates an oversold stock.
Time Warner has an MACD (moving average convergence divergence) of 0.20, which
indicates an upward trading trend. A positive MACD denotes an upward trading trend, while
a negative MACD denotes a downward trading trend.
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In contrast, TWXs peers The Walt Disney Company (DIS), Comcast (CMCSA), and Twenty-
First Century Fox (FOXA) have MACDs of -1.2, 0.26, and -0.24, respectively.
Bollinger bands for Time Warner

Bollinger bands are a combination of a stocks moving averages. Time Warner has an upper
Bollinger band of $100, a middle Bollinger band of $99, and a lower Bollinger band of $99.
An upper band indicates a band that moves above a companys stock price. A lower band
moves below the stocks price, and a middle band moves between the two.

How Are Analysts Rating AT&T?
AT&Ts price movement

On June 28, 2017, AT&T (T) stock closed at $37.94. The telecommunication giant had a
market capitalization of $230.5 billion as of that date. In contrast, its peers Verizon
Communications (VZ), T-Mobile (TMUS), and Sprint (S) have market capitalizations of $179.3
billion, $50.7 billion, and $33.8 billion, respectively.
AT&T stock has fallen 8.6% in the past year and 10.8% year-to-date. AT&Ts peers Verizon
and Sprint have also seen their stock prices fall 16.0% and 1.7%, respectively, year-to-date.
However, T-Mobile has seen its stock rise 6.9% year-to-date.
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Analyst recommendations for AT&T

Of the 29 analysts covering AT&T stock, ten have rated it a buy, 18 have rated it a hold,
and one has rated it a sell. Analysts have set a target price of $40.73 for the stock and a
median target price estimate of $42.
AT&T is currently trading at a discount of 11.0% to its median target price.
How the Technical Indicators for AT&T

Compare to Its Peers
Technical indicators for AT&T

The closing price for AT&T (T) on June 28, 2017, was $37.94. The stock is trading 5.2%
below its 100-day moving average of $40, which was 2.7% below its 50-day and 20-day
moving averages of $39 each. The stock has a 14-day RSI (relative strength index) of 41,
indicating that the stock is leaning toward being oversold.
In contrast, AT&Ts peers T-Mobile (TMUS), Verizon Communications (VZ), and Sprint (S)
have 14-day RSIs of 27, 35, and 42, respectively. When a stocks RSI is below 30, it shows
that a stock is oversold, while an RSI above 70 shows an overbought stock.
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Bollinger bands and MACD

AT&T has an MACD (moving average convergence divergence) of -0.15. Verizons MACD is
-0.16, T-Mobiles is -0.15, and Sprints is -0.05. A negative MACD indicates a downward
trading trend, while a positive MACD indicates an upward trading trend.
AT&T has an upper Bollinger band of $39, a middle Bollinger band of $39, and a lower
Bollinger band of $38. Bollinger bands are a combination of the stocks moving averages.
Here Are the Valuation Metrics for AT&T

Valuation metrics for AT&T

In this final part of our series, lets look at the valuation metrics for AT&T (T). Valuation
metrics include price-based multiples and EV (enterprise value)-based multiples. These
metrics include forward multiples such as EV-to-EBITDA (earnings before interest, tax,
depreciation, and amortization) and PE (price-to-earnings) multiples.
AT&T has an EV-to-EBITDA multiple of 6.6x, while its peers Verizon Communications (VZ), T-
Mobile (TMUS), and Sprint (S) have EV-to-EBITA multiples of 6.6x, 6.5x, and 5.7x,
respectively.
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AT&T likely to be undervalued on a PE basis

AT&T has a PE multiple of 12.8x, while its peers Verizon, T-Mobile, and Sprint have PE
multiples of 11.8x, 24.5x, and 97.9x, respectively. AT&T had an EV of $352.7 billion on June
28, 2017. The company has an EV-to-FCFF (free-cash-flow-to-firm) ratio of 19.8x.
Short interest ratio

AT&T has a short interest ratio of 6.9% as of June 28, 2017. A short interest ratio is taken as
a percentage of float. If its more than 40.0%, its expected that the stock will most likely fall.
How Disney's Strategy Is Playing Out

How Disney's Strategy Is Playing Out PART 1 OF 9
A Look at Disneys Advertising Strategy

Disneys advertising costs rise

The Walt Disney Companys (DIS) revamp of its ABC Network seems to be reaping strong
results. On June 29, Broadcasting & Cable reported that the companys upfront sales grew
by high single digits. According to the report, Disneys ABC Network had a CPM (cost per
thousand viewers) increase in the high single-digit range for its day and cable programming,
while its late-night and kids programming saw a CPM rise in the low double-digit range.
One main reason for Disneys higher CPM has been the companys revamp of its ABC
Network. At the advertising upfronts held earlier this year, Disney launched ten new shows
and announced a reboot of popular old television shows such as Roseanne. The company
took this step to shore up its declining program ratings.
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According to a Wall Street Journal report from earlier this year, citing Nielsen data, Disneys
ABC Networks viewership had fallen 8% in the primetime slot and 11% among adults in the
1849 age group. Currently, around 60% of television programming for Disneys ABC
Network is being produced by Disneys ABC Studios.
Why Disneys ABC Network is important for the company

Disneys ABC Network is part of the companys Media Networks business. As the above
chart indicates, in fiscal 2Q17, aliate fees and advertising made up 54.3% and 32.5%,
respectively, of Disneys Media Networks total revenue of $5.9 billion. These
figures indicate that aliate fees and advertising are major sources of revenue for the Media
Networks business. As a result, a revamp of programming at ABC was important for the
company to boost its advertising revenue. Disneys ABC Network also produces original
programming for video streaming services such as Netflix (NFLX).
Is Disneys Movie Franchise Strategy

Losing Its Sheen?
Movie sees a weak opening

This month, The Walt Disney Company (DIS) released its movie, Cars 3, from the Cars
franchise. However, according to reports, the movie has earned only $141.3 million globally
since its release. In contrast, Time Warners (TWX) Wonder Woman has earned $321.2
million in the US (SPY) alone. Wonder Woman belongs to the DC Comics franchise.
It remains to be seen whether Disneys franchise-focused strategy will continue to reap

strong benefits. In its fiscal 2Q17 earnings call, Disney reiterated that its movies box oce
success and its popular brands such as Star Wars made it a valuable partner for theater
distributors. However, the company has pushed back some of its movie releases, including
Star Wars: Episode IX and Frozen 2, to 2019.
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Why Disneys franchise-focused strategy works

Disneys acquisitions of Pixar, Marvel, and Lucasfilm have worked out well for the company.
After its acquisition of Pixar, the company has produced around 30 movies, and its movies
from Pixar, Lucasfilm, and Marvel have earned a total of $800 million globally. Time Warner
(TWX) is also following a franchise-focused strategy, and expects to release 17 movies from
its franchises between 2016 and 2020.
Why Sports Programming Is Key to

Disneys Business Strategy
Live streaming of sports seems to be on the rise

There seems to be a definite shift in sports fans views on live streaming. On June 23, The
New York Post, citing New England Patriots owner Robert Kraft, stated that live streaming of
sports seemed to be the way to go, at least for the NFL (National Football League). Earlier
this year, Amazon (AMZN) paid $50 million for streaming rights to NFL games. The report
also cites a report from Reuters, stating that Amazon is likely to charge advertisers a
princely sum of $2.8 million for over-the-top advertising for Thursday night football games.
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Considering this trend, The Walt Disney Company (DIS) has been forced to take a closer
look at ESPNs programming strategy. Sports programming is a lucrative revenue stream for
media companies, as it enables them to generate revenue through advertising.
Disney is making ESPN more mobile friendly

In May this year, Disney revamped its Sports Center so that it is oriented more towards the
digital format and driven by the personality of its anchors. Disney has said that around 80%
of ESPNs viewers prefer to stream its content on mobile devices. At the end of fiscal 2Q17,
ESPNs suite of mobile applications had 23 million unique users each month, and its content
was viewed for a total of 5.2 billion minutes.
The rise in popularity of viewing on mobile devices is likely to increase further. According to
the Cisco (CSCO) Visual Networking Index, video data is likely to reach ~77% of mobile
data trac in the United States (SPY).
Disneys Theme Parks Are Riding High:

Heres Why
Analysts bullish about Disneys theme parks

According to a Barrons report from June 21, citing Morgan Stanley (MS) analyst Benjamin
Swinburne, The Walt Disney Companys (DIS) theme park business now contributes more to
its operating income than its ESPN network does. In fiscal 2Q17, Disneys theme parks had
an operating income of $750 million, up by 20% from fiscal 2Q16.
A major reason for the success of Disneys theme park business has been the companys
eective leveraging of its intellectual property. The company continues to add new
attractions at its theme parks, and as a result, expects its expenditure to rise for the theme
park business in fiscal 3Q17.
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Another reason that Disney expects its theme park expenditure to rise is the dry docking of
its ship, Disney Fantasy, for 18 days. While the company is looking at increasing its cruise
ship fleet size to six, the new ships are not expected to become operational until 2021
2023.
Disneys theme park performance in fiscal 2Q17

Disneys theme park business had revenue of $4.2 billion in fiscal 2Q17, a rise of 9% year-
over-year. The rise in revenue was mainly driven by higher attendance and higher per capita
guest spending. The company believes that its hotel business has ample room for growth,
due to higher theme park attendance and longer stays at its hotels.
Why China Is Becoming an Important

Market for Disney
Popularity of English-language content in China

Media companies in the United States (SPY) are increasingly looking at the Chinese (FXI)
market as Hollywood movies become popular there. However, there have also been
concerns about box oce success in the country. On June 27, The Wall Street Journal
reported, citing an unknown source, that the six major Hollywood studios, represented by
the MPAA (Motion Picture Association of America), have enlisted PwC to audit box oce
collections of select Hollywood movies released in China last year.
This audit is the result of the studios concern that their box-oce earnings in China could
be underreported. The Walt Disney Companys (DIS) movies, such as Zootopia, have
been huge hits in the country. Also, the popularity of Disneys movie characters led the
company to open Shanghai Disneyland.
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Shanghai Disneyland
Shanghai Disneyland has welcomed more than 10 million visitors, exceeding Disneys
expectations. As a result, Disney expects that the theme park will break even by the end of
fiscal 2017. The company hopes to continue adding new attractions to Shanghai
Disneyland, such as Toy Story Land, to boost the theme parks popularity further. Other
companies looking at opening theme parks in China include Comcasts NBCUniversal
(CMCSA) and Six Flags (SIX).
A Look at Disneys Financial Metrics

Disney declares a dividend

Recently, The Walt Disney Company (DIS) declared a half-year dividend of $0.78 per share,
payable on July 27. Disney had diluted EPS (earnings per share) of $1.50 in fiscal 2Q17, up
15% YoY (year-over-year).
However, Disney expects modest growth in EPS for fiscal 2017, due to factors such as
rising programming costs and capex. In fiscal 2017, the company expects its cable network
programming costs to rise 8%. The company, along with Time Warners (TWX) Turner
Network, has entered into a deal with the NBA (National Basketball Association) for sports
programming. The deal came into eect in October 2016 and will last through 2025.
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Total expenses for Disneys Cable Networks business are expected to rise 16% YoY in fiscal
2017. However, Disney expects its capex to fall ~$200 million YoY due to changes in timing
for some of its ongoing projects, such as adding new attractions at theme parks.
Disneys debt-to-capital ratio

According to Disney, it always prefers to have a disciplined approach to its capital allocation
strategy, and will look at investing in businesses for growth and giving a superior return to
shareholders. The companys acquisitions of Pixar, Marvel, and Lucasfilm have given it
valuable intellectual property that can be monetized eectively across its businesses.
As the above chart indicates, Disney has a low debt-to-capital ratio of 30%. In contrast,
peers Comcast (CMCSA), Time Warner (TWX), and 21st Century Fox (FOXA) have ratios of
51%, 50%, and 56%, respectively. So far, Disney has no plans to take on any more debt. It
has $3.8 billion in cash on its balance sheet, which provides the company with enough
financial flexibility to make investments.
Why Analysts Are Upbeat about Disney

Analysts remain optimistic about Disney

Of the 32 analysts covering Disney (DIS), 18 analysts have rated the stock a buy, 12
analysts have rated it a hold, and only two analysts have rated the stock a sell.
Analysts have set a stock price target of $117.44 for Disney, with a median target price of
$124. Disney is currently trading at a discount of 17% to its median target price.
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Disneys price movement

Disneys stock price closed at $105.71 on June 29. The companys stock price has risen 9%
in the past year and 1.4% year-to-date. In contrast, peers Comcast (CMCSA), Time Warner
(TWX), and 21st Century Fox (FOXA) have seen their stock prices rise 21.6%, 39.2%, and
4.4%, respectively.
One major reason for analysts optimism regarding Disney has been the companys ability
to monetize its franchises and intellectual property eectively. With Shanghai Disneyland
(FXI), the company is looking at international markets to make its franchises popular and
earn revenue in the process.
How Disneys Technical Indicators

Compare
Disneys moving averages

The Walt Disney Companys (DIS) stock price closed at $105.71 on June 29. The stock is
trading below its moving averages. Disneys stock is trading 3.9% below its 100-day moving
average of $110, 3% below its 50-day moving average of $109, and 0.3% below its 20-day
moving average of $106.
Bollinger Bands
Bollinger Bands are a combination of a stocks moving averages. Disney has an upper
Bollinger Band of $107, a middle Bollinger Band of $106, and a lower Bollinger Band of
$104.
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Relative strength index

Disney has a 14-day RSI (relative strength index) score of 50, indicating that the stock is
approaching the overbought level. An RSI score below 30 shows that a stock is
approaching the oversold level, while an RSI score above 70 indicates that a stock is
overbought.
Moving average convergence divergence

While Disney and 21st Century Fox (FOXA) are following a downward trading trend with
negative MACDs (moving average convergence divergence) of -1.0 and -0.2, respectively,
Comcast (CMCSA) and Time Warner (TWX) exhibit an upward trading trend with MACDs of
0.11 and 0.2, respectively.
Analyzing Disneys Valuation Metrics

Valuation metrics for Disney

The Walt Disney Company (DIS) has an EV-to-EBITDA (enterprise value to earnings before
interest, taxes, depreciation, and amortization) multiple of 9.9x. In contrast, peers Time
Warner (TWX), Comcast (CMCSA), and 21st Century Fox (FOXA) have EV-to-EBITDA
multiples of 10.5x, 8.2x, and 8.9, respectively.
Valuation metrics usually consist of price-based multiples and enterprise value-based

multiples. Disney is trading at a PE (price-to-earnings) multiple of 15.7x, while Time Warner,
Comcast, and 21st Century Fox have PE multiples of 15.2x, 17.6x, and 13.8x, respectively.
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Disneys value proposition

Disney has been a leader in the media industry when it comes to monetizing its intellectual
property through its businessesmovies, theme parks, and consumer products. The
company is looking at business growth through merger and acquisition activity, indicated by
its acquisition of Pixar and its generation of revenue through this acquisition. The company
is also making eorts to adapt ESPN to the changing media landscape, orienting it towards
a more digital environment.

AT&T Thinks Time Warner Should Focus On Mobile-Friendly Content - Market Realist

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AT&T Thinks Time Warner Should Focus On Mobile-Friendly Content - Market Realist

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The Hidden Opportunities in AT&T's Acquisition of Time Warner

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 1 OF 15

AT&T Thinks Time Warner Should Focus on

Rise in mobile viewing content

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Rise in mobile video trac

What Are AT&Ts Plans for Time Warner in

AT&Ts advertising plans

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TWXs focus on targeted advertising

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 3 OF 15

How AT&T Views the Time Warner

AT&Ts rationale behind acquiring Time Warner

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Rising popularity of online television services

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 4 OF 15

Why the AT&TTime Warner Proposed

Senator opposes AT&TTime Warner merger

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The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 5 OF 15

Why Time Warner Is Focusing on Short-

Time Warners deal with Snapchat

Considering the popularity of messaging applications such as Snapchat (SNAP), Time

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Popularity of short-form content

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 6 OF 15

How AT&T Could Benefit from Time

TWXs CNN network under fire

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Time Warners digital properties

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 7 OF 15

Why Time Warners Franchise-Focused

Wonder Woman works wonders for Warner Bros.

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AT&T could stand to benefit from the success of Wonder Woman

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 8 OF 15

Why Hulus Online TV Service Could Be a

Hulus online television service

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How AT&T is likely to benefit from Hulu

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 9 OF 15

A Look at Time Warners Financial Metrics

Time Warners debt-to-capital ratio

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The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 10 OF 15

What Are the Valuation Metrics for Time

Time Warners valuation metrics

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The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 11 OF 15

How Wall Street Analysts Are Rating Time

Time Warners moving averages

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Analyst recommendations for Time Warner

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 12 OF 15

How Time Warners Technical Indicators

Technical indicators for Time Warner

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Bollinger bands for Time Warner

The Hidden Opportunities in AT&T's Acquisition of Time Warner PART 13 OF 15

AT&Ts price movement

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Analyst recommendations for AT&T

AT&T is currently trading at a discount of 11.0% to its median target price.