InterDigital v. Disney litigation
Technology
MDC Financial Research’s Event-Driven Legal℠ service is monitoring InterDigital, Inc. v. The Walt Disney Company (Case #25-00895, C.D. Cal), where a Hearing on Disney’s Motion for a Preliminary Injunction seeking to block the enforcement of a potential Brazilian Injunction is scheduled to be held on May 30th. The case relates to InterDigital's assertion of its video coding/processing Patents against Disney. Disney's Counterclaims will also be argued at this Hearing. MDC will attend this and future proceedings to identify legal catalysts potentially material to InterDigital’s share price. Institutional investors can contact MDC for timely insights, court coverage, and risk assessment on this and other event-driven equity opportunities.
Edition: 212
- 30 May, 2025
Communications
Regardless of what one thought of FUBO and/or Hulu Live TV separately, the combination of the two - via a merger announced last month - is transformative. It will be the 6th largest pay TV video subscriber platform in the US. Increased scale and Disney’s heft in the marketplace should lead to improved content and distribution deals, bolstering the gross profit margin. Doug Arthur initiates with an Overweight rating and a TP of $6.00 (35% upside). His projected adj. EBITDA estimates are not as optimistic as FUBO’s management. However, he still envisions combined adj. EBITDA of $301m by 2027 and close to $400m by 2028.
Edition: 204
- 07 February, 2025
Earnings Q&A evasion analysis
Paragon’s latest offering on their ManagementTrack platform highlights evasive answers near real-time during earnings seasons. Their model can also flag abnormally high evasiveness % and if past instances have led to underperformance. Recent examples include 1) Lamb Weston - management's evasiveness increased significantly to 60% from 25% and 33% the prior 2 quarters. 2) McCormick - evasiveness increased to 36% from sub-10% the prior 2 quarters. 3) Disney - last quarter executives answered 78% of questions evasively. 4) Click here to access a report Paragon created overlaying their earnings call analysis with a recent note a short seller published on Roblox.
Edition: 197
- 18 October, 2024
Communications
Douglas Arthur raises his Q4 adj. EPS estimate to $1.10 per share (+34% Y/Y). He anticipates significant profit upswings in both DTC and Content (Studios) to more than offset continued weakness at Linear, lower profits at Sports and softness in Parks. In addition, given no Hulu hit in non-controlling interests and expected lower International Parks profits, adj. EPS should benefit from a lower deduction from non-controlling interests. The stock price has broken its lengthy downtrend with Parks weakness largely baked in, while future hotel bookings suggest a turnaround, a few quarters out. Box office results have been very favourable and the slate is strong. DTC is doing fairly well and the upside profit contribution could be significant in FY25E and beyond.
Edition: 196
- 04 October, 2024
Communications
Decades of price gouging and significant brand mismanagement was bound to cause Parks to slip up sooner rather than later. DIS will start FY25 with Parks growth flat (at best) and the well-known myriad of headwinds facing the Entertainment division. Warner Bros. Discovery just took a massive write-down on its linear networks. DIS will have to do the same at some point. Most importantly, modelling future EPS growth is only getting more difficult. EPS is topping out around current levels. What to pay for peak earnings? It is not 17x-25x. The new trading range for the stock as it slowly "dies" is $30-$75/share assuming $3.00-$5.00 of EPS and a 10x-15x multiple.
Edition: 193
- 23 August, 2024
Communications
DTC subscriber growth has stalled in the face of price increases, marketing cuts and future content reductions, while the company’s cost allocation accounting means streaming losses in FY22 ($3.4bn) were understated relative to the accounting policies of Warner Bros Discovery / Comcast to the tune of $2.5bn, giving an indication of the challenges. Despite assuming a DIS / Hulu merger, Arete expects DTC to generate one-third less EBITDA long-term than they previously modelled and have lowered their TP from $94 to $65 (25% downside).
Edition: 165
- 21 July, 2023
Communications
The heavy lifting on restructuring is now largely complete (Paramount and Disney are just starting theirs) with expenses down $2.8bn and cash content spending running at ~$4bn/qtr. Studios look likely to recover from 2H23, advertising looks to have bottomed, and the new Max streaming platform has a good mix of content that should be attractive to all viewers meaning top and bottom line should show amelioration from here. Arete forecasts EBITDA of $11.2bn in 2023 and FCF of $4.4bn. For 2024, they expect a further improvement in EBITDA to $13.1bn and FCF to jump to $5.9bn (net debt declines to $36.1bn (2.8x) allowing a buyback to start late in the year). TP $31 (130% upside).
Edition: 162
- 09 June, 2023
Communications
Douglas Arthur doesn’t see any crisis occurring at the company as he initiates coverage with a Buy rating in this 70-page report - four aspects stand out: 1) the size and growth prospects of the DTC streaming business; 2) the magnitude and geographic reach of the Parks footprint; 3) the depth, richness and velocity of the company’s content production machine; 4) and, potential earnings power if and when the large streaming business starts to make money. Douglas forecasts adjusted EPS to increase from $3.53 earned in FY22 to $6.90 in FY26, an 18.2% compounded rate of growth.
Edition: 152
- 20 January, 2023
Communications
Stock surges after Bob Iger returns as CEO, but Andrew Freedman has a really hard time seeing how you make money being long DIS over the next several months - while he is an Iger fan, the reality is that the business is incredibly challenged on many fronts. Tough decisions are required. Andrew thinks they should be moving as much of the linear content over exclusively to streaming as fast as possible and start raising the price on the DTC bundle in the process. Consensus has EPS going from $4.17 in FY23 to $6.57 in FY25, but he doesn’t expect to see $5.00 in EPS again until FY27. Don't chase the shares higher and look to short $110-120.
Edition: 149
- 25 November, 2022
Communications
High conviction mis-valuation opportunity only emphasised by Warren Buffet's increased investment in Paramount Global - Robert Sassoon argues Netflix’s woes are company specific (reliance on streaming subscriptions has simply laid bare its vulnerabilities). By contrast, WBD, PARA and Disney have diversified revenue models, backed up with high quality content libraries. WBD’s debt burden is also less onerous than it appears (very attractive fixed rate terms and interest payments will be dwarfed by FCF generation prior to the first repayment dates in 2024). Attributing a PARA-like value multiple to WBD's consensus 2023 EBITDA offers 80%+ upside.
Edition: 136
- 27 May, 2022
Flutter Entertainment (FLTR LN) UK
Consumer Discretionary
Now trades at a meaningful discount to peers despite dominant position in ALL its major markets - this has been caused by negative, but “fundamentally meaningless” headlines over the last few months. Another issue is that US investors are still not familiar with the company despite FLTR’s US revenues being 50% higher than the No.2 player (its US segment’s implied valuation is just 3.5x FY23 EV / Sales vs. 8x for DraftKings). A spin-out of FanDuel (possibly in 1H22) should provide a catalyst to crystallise the company’s SOTP value; or given the ongoing consolidation in the online gambling space, could Disney be lining up a takeover? TP £200 (80% upside).
Edition: 124
- 26 November, 2021
Technology
Sony’s execution on its IP cross selling continues to gather steam and the Jan-Mar quarter could see a slew of major titles releasing on PS5, some old favourites being released for PC to broaden the PlayStation fanbase and a couple of blockbuster movies to boot. If Uncharted succeeds and Spider-Man: No Way Home is successful in accelerating the launch of the Spiderverse, Sony’s IP catalogue could start to almost rival Disney’s.
Edition: 122
- 29 October, 2021
Something to Snack On: Three that Should Thrive
Consumer Staples
Walmart, Target, and Albertsons, roughed up by last month’s choppy market, are now building momentum and recent pullbacks present buying opportunities. WMT-Home Depot partnership shows a positive business trajectory. TGT is creating an unrivalled total experience allying with Levi's, Apple and Disney. ACI's company specific initiatives, including streamlining purchasing and growing its private brands, show the business is strong.
Edition: 121
- 15 October, 2021
Discovery (DISCK)
Communications
Robert Sassoon explains why market apathy towards Discovery’s merger with AT&T's WarnerMedia is a gift to value investors and believes the $43bn deal will give Warner Bros. Discovery a real shot at competing more effectively in the DTC streaming market. Robert sees 30%+ upside over the next 12-15 months (based on a very conservative 10x 2023 EV/EBITDA), with the prospect of a greater than 100% return should investors become “a little more excited” about WBD's streaming service strategy as they have done with Netflix and Disney.
Edition: 112
- 11 June, 2021