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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.


๐Ÿ“บ ๐˜ฝ๐™ช๐™จ๐™ž๐™ฃ๐™š๐™จ๐™จ ๐˜ฟ๐™š๐™จ๐™˜๐™ง๐™ž๐™ฅ๐™ฉ๐™ž๐™ค๐™ฃ:


โ€ข Discovery is a Mass media factual television company, operating under

two segments: US Networks and International Networks

โ€ข US Networks: Discovery Channel, Food Network, HGTV, TLC, Animal

Planet, amongst others

โ€ข International Networks: Eurosport, Dmax, amongst others

โ€ข Launched streaming service, Discovery+, earlier this year

โ€ข Exclusive Rights to Olympics and BBC (outside UK, China and Ireland),

โ€ข 800 million monthly unique viewers globally

โ€ข 250 million hours viewed daily

โ€ข 65% of revenues in 2020 came from US Networks, 38% Advertising and

27% Distribution

โ€ข 35% of revenues in 2020 came from International Networks, 15%

Advertising and 19% Distribution

โ€ข 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)


๐Ÿš€๐˜พ๐™–๐™ฉ๐™–๐™ก๐™ฎ๐™จ๐™ฉ๐™จ:

โ€ข Content creation/acquisition is less expensive compared to competitors

โ€ข Olympics in 2021 could bring $175 million to $200 million in operating

income before depreciation and amortization

โ€ข Discovery+ ARPU expected to 3-4X US Networks Linear

โ€ข Possible share buybacks


โš ๏ธ๐™๐™ž๐™จ๐™ ๐™จ:


โ€ข Streaming business is very competitive with Netflix, Disney+, Amazon

Prime, Apple TV+ and others

โ€ข Streaming business might be a cash flow drain in initial years

โ€ข Cable Networks businesses are in decline

โ€ข Concentrated business


๐Ÿ’ต๐™๐™ž๐™ฃ๐™–๐™ฃ๐™˜๐™ž๐™–๐™ก ๐˜ผ๐™ฃ๐™–๐™ก๐™ฎ๐™จ๐™ž๐™จ:


โ€ข Revenues of $10.7 Billion in FY20 down from $11.1 Billion in FY19

โ€ข Operating income of $2.73 Billion in FY20 vs $3.19 Billion in FY19

โ€ข Net income of $1.21 Billion in FY20 down from $2.06 billion in FY19

โ€ข Free Cash flow of $2.33 Billion in FY20 vs $3.11 million for FY19

โ€ข 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


๐Ÿ’ฐ๐™‘๐™–๐™ก๐™ช๐™–๐™ฉ๐™ž๐™ค๐™ฃ ๐™–๐™ฃ๐™™ ๐˜พ๐™ค๐™ฃ๐™˜๐™ก๐™ช๐™จ๐™ž๐™ค๐™ฃ:

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


Hereโ€™s the full analysis of Discovery:

https://ishfaaqpeerally.teachable.com/courses/662813/lectures/31950949


ย 

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