It's a clash of the media titans. Walt Disney (NYSE: DIS) and Time Warner (NYSE: TWX) are two of the most iconic studios of our time, and both have built sprawling multimedia empires around that common core.
But if you're looking to invest in that space, one of these content creation giants stands head and shoulders above the other.
By the numbers
|Metric||Walt Disney||Time Warner|
|Market cap||$163 billion||$77 billion|
|TTM revenue||$56 billion||$30 billion|
|TTM EBITDA||$17 billion||$9 billion|
|Trailing price-to-earnings ratio||18.2||19.0|
Data source: Yahoo! Finance. TTM = trailing 12 month.
So far, so neck-and-neck. Disney is about twice the size of Time Warner, but the companies otherwise seem to fire on just about the same number of financial cylinders. The two stocks also appear to be reasonably valued today, and short-sellers largely stay away.
Here's where the two paths diverge.
Disney is in an excellent position to keep growing as a stand-alone business for decades to come. Recent issues with soft ad sales at sports network ESPN put the brakes on Disney's share price, but that's a short-term issue with little effect on the House of Mouse's long-term bottom line. It's the kind of stock you can buy for your kids today and watch it grow for decades without losing any sleep.
Time Warner is going a very different route. The company is knee-deep in a massive merger with Telecom giant AT&T (NYSE: T) , and I see little reason to doubt that the deal will close by the end of 2017. So what you're really buying here isn't Time Warner's unbridled media muscle, but a smaller part of Ma Bell's communications kingdom.
The combination may make some sense when you pair Time Warner's content production acumen with DIRECTV's broadcast powers and a touch of AT&T's wireless fairy dust. It might work.
That being said, I have not been a fan of AT&T or its stock in recent years. If the $85 billion deal falls apart, Time Warner could make it onto my investing shortlist on its own. Until then, I expect AT&T's lack of long-term vision to stifle Time Warner's creative genius rather than making the most of it.
The winner, hands down, is Walt Disney. The Mouse will reward you for a lifetime, and I'm simply not so sure about Warner.
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