Discovery Stock Analysis
I've been investing in Discovery $DISCA since last week. Hopefully, the stock price will keep going down so that we can buy more. Just like ViacomCBS $VIAC , Discovery was a victim of the margin call on Archegos Capital, managed by Bill Hwang. The stock gained 300% in one year before crashing by 60% in weeks.
📺 𝘽𝙪𝙨𝙞𝙣𝙚𝙨𝙨 𝘿𝙚𝙨𝙘𝙧𝙞𝙥𝙩𝙞𝙤𝙣:
• Discovery is a Mass media factual television company, operating under
two segments: US Networks and International Networks
• US Networks: Discovery Channel, Food Network, HGTV, TLC, Animal
Planet, amongst others
• International Networks: Eurosport, Dmax, amongst others
• Launched streaming service, Discovery+, earlier this year
• Exclusive Rights to Olympics and BBC (outside UK, China and Ireland),
• 800 million monthly unique viewers globally
• 250 million hours viewed daily
• 65% of revenues in 2020 came from US Networks, 38% Advertising and
27% Distribution
• 35% of revenues in 2020 came from International Networks, 15%
Advertising and 19% Distribution
• Since shows are factual, expenses are limited compared to competitors
with 2020 operating margins of 25% vs 18% for Viacom and Netflix
$NFLX and 2% for Disney $DIS (20% in 2019)
🚀𝘾𝙖𝙩𝙖𝙡𝙮𝙨𝙩𝙨:
• Content creation/acquisition is less expensive compared to competitors
• Olympics in 2021 could bring $175 million to $200 million in operating
income before depreciation and amortization
• Discovery+ ARPU expected to 3-4X US Networks Linear
• Possible share buybacks
⚠️𝙍𝙞𝙨𝙠𝙨:
• Streaming business is very competitive with Netflix, Disney+, Amazon
Prime, Apple TV+ and others
• Streaming business might be a cash flow drain in initial years
• Cable Networks businesses are in decline
• Concentrated business
💵𝙁𝙞𝙣𝙖𝙣𝙘𝙞𝙖𝙡 𝘼𝙣𝙖𝙡𝙮𝙨𝙞𝙨:
• Revenues of $10.7 Billion in FY20 down from $11.1 Billion in FY19
• Operating income of $2.73 Billion in FY20 vs $3.19 Billion in FY19
• Net income of $1.21 Billion in FY20 down from $2.06 billion in FY19
• Free Cash flow of $2.33 Billion in FY20 vs $3.11 million for FY19
• Balance Sheet
Total assets: $34.0 Billion ; total liabilities: $22.0 Billion; book value: $10.4
Billion
Cash: $2.09 Billion, debts: $15.4 Billion, current assets: $6.13 Billion,
current liabilities: $3.08 Billion
💰𝙑𝙖𝙡𝙪𝙖𝙩𝙞𝙤𝙣 𝙖𝙣𝙙 𝘾𝙤𝙣𝙘𝙡𝙪𝙨𝙞𝙤𝙣:
My analysis shows that Discovery stock is undervalued, even with a margin of safety.
Watch the full video on YouTube:
https://www.youtube.com/watch?v=HR5WsNrqaAU&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=1
Here’s the full analysis of Discovery:
https://ishfaaqpeerally.teachable.com/courses/662813/lectures/31950949
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