Disney's parks and resorts business generates significant
revenue but limited value because of its highly capital-intensive
nature. A Trefis cash-flow analysis finds that the parks and
resorts segment contributes about 30% of Disney's revenues but
only 10% to its estimated stock value, making it the company's
fourth-most important division.
) competes with News Corp (
), Time Warner (
), Viacom (
) and other diversified media conglomerates. However, Disney is the
only big media company to operate a parks and resorts business.
Having run the numbers, we can see why. Our analysis follows
Mickey Mouse margins
Disney spends significant capital on construction and expansion
projects in its parks and resorts, both domestically and worldwide.
The segment generated about 67% of Disney's total capital
expenditures in fiscal 2009.
Because expenses in the parks and resorts segment are so high,
profits are very low compared to revenues. The division's EBITDA
margin was about 24% in fiscal 2009. That's higher than margins for
Disney Studios but lower than the margins of the Media
Networks business, which includes ESPN and other channels.
We expect EBITDA margins at the parks and resorts segment to
rise slowly during the Trefis forecast period, nearing 26% by 2016.
You can drag the trend-lines in the charts above to create your own
divisional forecasts for EDITDA and capital expenditures as a
percentage of EBITDA, respectively, and see how they impact
Disney's stock price.
Bottom line: although the parks and resorts division generates
significant indirect value for Disney by helping the company get
close to its audience, that's a very expensive way to gather market
You can see
the complete $37.44 Trefis price estimate for
Disney's stock here.
Reported in Disney's SEC filings.
Estimated using D&A and Operating margin figures in SEC
filings for the Parks & Resorts segment.