"Marsellus ain't got no one in the 818."
Samuel L. Jackson's Jules utters that line to John Travolta's Vincent in Pulp Fiction. After doing a deep dive on Disney's (DIS) first-quarter earnings, I am wondering if CEO Bob Iger has anyone in the 818, which is the area code for Burbank, California, where Disney is headquartered.
That Disney is an incredibly poorly managed company is evident in the performance of Disney stock. At a current price of $91.63, DIS has fallen 11.83% in the past five years. This jaw-dropping underperformance is exacerbated by the fact that Disney does not pay a dividend.
The first stop in my Disney deep-dive was the earnings presentation for the first quarter. On Page 16 of the presentation, in the slide showing Total Segment Operating Income, there is a comparison of results from the periods ended April 1, 2023 and April 2, 2023. Huh? The first quarter lasted one day???
That a $167 billion public company could have such a blatant typo in its earnings presentation indicates how poorly run Disney is at the corporate level. So does the DIS stock chart, obviously.
In addition to Donald, Mickey and Goofy, Disney owns Pixar, Lucasfilm and Marvel. In the linear realm, Disney owns ESPN, which has valuable content in the form of live sports broadcasts. Those are some blue-chip properties. How is this company not throwing off boatloads of cash from the immense quality and depth of its content library?
In a word... streaming.
Disney trumpeted the decline in losses at its direct-to-consumer business in the first quarter, but that quarterly loss was still $700 million, creating a staggering $5.3 billion cumulative loss for the DTC business in the past five quarters.
Bob Iger's return as CEO was trumpeted by some in the financial media as the return of the king, and a return to financial discipline at the Mouse House. I just do not see such discipline reflected in Disney's 1Q23 results. Nor, again, is that evident in DIS share price.
Yet, as my favorite Instagram (my firm's IG is @excap_official) account, @NotJeromePowell noted today, Disney's management malfeasance hasn't stopped certain FinTV commentators from predicting great performance from DIS stock.
That hasn't happened yet, and I see no reason why it will in the foreseeable future.
Iger and his Board need to figure out how to properly monetize Disney+... or figure out how to find alternative employment. Disney's content library is second-to-none. If it takes a different manager, perhaps one far-removed from the 818, to realize that value, then so be it.
As Elon is learning the hard way, though, it is really difficult to pull off an LBO in an environment where the Fed Funds rate is sitting at 17-year high. I wouldn't hold my breath waiting for a takeover offer for Disney.
I recently trumpeted the performance of my DEATH model portfolio, which is rocking in today's brand market selloff and has now posted an 84% gain in a year and one day of existence. DEATH is mainly composed of smaller companies, most of which should not be public in the first place.
Disney doesn't fit the DEATH profile. The Mouse House isn't going to die. It will just continue its slow-burn into irrelevance and cash-burn from the Streaming Wars. Iger and his friends in the 818 should take a lesson from one of their own properties, Star Wars.
Sometimes, like Han Solo piloting the Millennium Falcon, a public company needs to chart a completely different course. The Force is not with Disney stock now. I don't see it returning any time soon.
