Stock Wars: Disney Vs. Comcast

Benzinga’s Stock Wars series matches up two leaders in a major industry sector, allowing readers to decide which company is the better investment.

In this week’s installment, we take a look at two titans that dominate the entertainment industry: Walt Disney Co. DIS and Comcast Corporation CMCSA.

The Mouse Factory: Few brands are more universally beloved than Disney, which traces its roots to the artistic genius and indefatigable spirit of the Chicago-born cartoonist Walt Disney.

Today, Disney oversees a variety of entities acquired over the years, including ESPN, 20th Century Studios, Pixar, Marvel Studios, Lucasfilm and Jim Henson’s Muppet Company, and the company is involved in films, television, streaming, live theater, recordings, theme parks, resorts, cruise lines, publishing and merchandising.

The COVID-19 pandemic era has been extremely challenging for the company. In its last earnings report from Feb. 11, it noted results for the fiscal first quarter ending Jan. 2 were “adversely impacted by the novel coronavirus (COVID-19). The most significant impact was at the Disney Parks, Experiences and Products segment where since late in the second quarter of fiscal 2020, our parks and resorts have been closed or operating at significantly reduced capacity and our cruise ship sailings have been suspended.”

But that’s not to say the past 14 months were completely problematic for the company.

Its Disney+ streaming service launched on Nov. 12, 2019, roughly four months before the first pandemic-related lockdowns in the U.S., and passed the 100 million subscriber mark on March 9, 2021, with viewers in 59 countries. The company initially predicted it would reach the 90 million subscriber mark by 2024 and was forced to recalibrate its forecast for 260 million subscribers by 2024.

The hefty subscriber volume for Disney+ coupled with the 12.1 million subscribers from the company’s ESPN+ streaming platform and 39.4 million subscribers from Hulu helped offset losses created by the Disney Parks, Experiences and Products revenue streams. In the company's last quarterly report, revenue for this operation decreased 53% year-over-year to $3.6 billion and segment operating results decreased $2.6 billion to a loss of $119 million.

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The company’s total revenues for the quarter were $16.2 billion, down from $20.8 billion one year earlier. This marked the third straight quarter of revenue declines.

Disney’s diluted earnings per share from continuing operations for the quarter decreased 98% to two cents — it had been $1.17 in the prior-year quarter. Excluding certain items, diluted EPS for the quarter decreased 79% to 32 cents from $1.53 one year earlier.

Still, don’t count out the Disney magic. Last week, the company’s stock was key in leading the Dow Jones to close on an up-note despite a dismal jobs report and investor speculation that the Federal Reserve will continue stimulus activity.

Disney trades around $184.67, closer to its 52-week high of $203.02 than its 52-week low of $99.66.

The Comcast Experience: Philadelphia-headquartered Comcast was founded in 1963. Not unlike Disney, the company is active in multiple sectors including cable services through its Xfinity brand, broadcasting via the NBC and Telemundo networks, movies through its Universal Pictures, Illumination, DreamWorks Animation and Focus Features operations, as well as the Universal theme parks and the Wells Fargo Center arena in Philadelphia. The company also owns Britain’s media and telecommunications conglomerate Sky Group.

One of the newer additions to the Comcast portfolio is Peacock, the streaming service operated by its NBCUniversal subsidiary. The service soft-launched on April 15, 2020, and reached the 42-million mark for sign-ups within a year.

Although Peacock’s viewing audience is still on the smallish side compared to Disney’s brands and Netflix Inc's NFLX 208 million subscribers, the service has been growing at a quick clip.

The company credited Peacock’s acquisition of World Wrestling Entertainment, Inc.'s WWE classic programming and its rebroadcasting of beloved TV series including NBC sitcom “The Office” for bringing viewers, which it hopes to keep with new productions including an eight-episode supernatural drama based on the Crypt TV “Girl In The Woods” films and a reality series featuring a mash-up of the stars in the sprawling “Real Housewives” television franchise.

But, Peacock is not Comcast’s cash cow. NBCUniversal is predicting $2 billion in losses for Peacock over the 2020 and 2021 span. And the company’s theme parks revenue created a drag with a 33.1% decline to $619 million in the first quarter, primarily due to Universal Orlando Resort and Universal Studios Japan operating at limited capacity while Universal Studios Hollywood was still closed.

Instead, Comcast’s fiscal year first quarter was fueled by its cable services operations. On a year-over-year basis, Comcast’s wireless revenue grew up nearly 50%, its broadband revenue increased 12%, business services took a 6.1% uptick and advertising revenue grew 10.8% (or 13.3%, if political advertising was excised from the equation).

For the first quarter, Comcast’s $27.2 billion in revenue was a 2.2% increase from the $26.6 billion revenue from one year earlier. Earnings per share for the first quarter was 71 cents, an increase of 54.3% compared to the previous year, while adjusted EPS increased 7% to 76 cents.

Comcast shares were trading at $57.50 at the market close Tuesday, closer to its 52-week high of $59.11 than two its 52-week low of $34.17.

The Verdict: Both companies have weathered the financial storm of the pandemic and are eager to reanimate their theme park and theatrical film release revenue streams.

Comcast has a unique opportunity ahead with back-to-back Olympics via the Tokyo games in July and the Winter Games from Beijing next February, which will be broadcast across its various broadcast and streaming outlets. If the company can maintain the levels of revenue for its cable services throughout the year, 2021 will end on a very positive note.

Disney has a few difficulties holding it back, especially with the relaunch of its cruise ship business and the resumption of its live theater presentations on Broadway and in touring companies across the country.

But pent-up demand for its theme parks and resorts could provide a vibrant degree of compensation as travelers eagerly return to their favorite destinations.

While Disney and Comcast are fine additions to anyone’s portfolio, this edition of Stock Wars gives the duelist edge to Comcast for its stronger fiscal year first quarter and more financially lucrative diversification of products and services.

(Photo by Márcio Cabral de Moura / Flickr Creative Commons.)