The Long-Term Trade Idea I'm Excited About for September (Part 1)

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Happy Saturday everyone

Going over a trade idea I like and reasoning why I like it. This would usually be for premium subscribers but we have a sponsor today.

This is part 1 - tomorrow will have more charts and ideas on other companies.

lets dig in…..

First up is Disney ($DIS)

First off I want to say - outside of the technicals this companies chart is showing at the moment, it is a long term portfolio play for me.

There is value here. We are at a deep multi year support with a valuation at pre-pandemic levels.

Reasons I’m Bullish on DIS

1. Sum-of-Parts Valuation:

   • Experiences Segment:

     • Valued at approximately $77 per share.

     • Based on a 15x FY2024 estimated EBITDA multiple.

   • Direct-to-Consumer (DTC) Segment:

     • Potential value of $57 per share by FY2027.

     • Based on a 3x price-to-sales multiple.

   • Linear Networks and Content Segments:

     • Provide additional upside potential.

2. Profitability of DTC Services:

   • Achieved profitability with a modest 0.7% EBITDA margin in Q3 2024.

   • Potential for significant margin expansion.

   • Management initiatives similar to Netflix’s success:

     • Cracking down on password sharing.

     • Bundling services.

     • Investing in technology.

3. Significant Investments in Parks and Experiences:

   • $60 billion investment demonstrates confidence in high-return opportunities.

   • Expansion of cruise line business.

   • Strategic shift from content spending to proven profit centers.

   • Expected to drive long-term free cash flow growth.

4. Robust Content Pipeline:

   • Studio arm showing a strong comeback.

   • Recent successes (“Inside Out 2”, “Deadpool & Wolverine”) breaking box office records.

   • Boost theatrical revenues and streaming engagement.

5. Insider Buying:

   • $1 million stock purchase by board member Calvin McDonald, CEO of Lululemon.

   • His understanding of consumer trends serves as a bullish indicator.

6. Attractive Valuation Metrics:

   • Limited downside risk - with stops at low $80s or a daily close at high $70s. We are at a deep multi year support.

   • Significant potential for multiple expansion as growth initiatives take hold and macro headwinds subside.

P.S. Any “clicks” to our sponsor allows me to drink good coffee in the morning. Please consider clicking through even if you don’t think you want to buy from them :-)

- JB

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