The WACC of The Walt Disney Company (Disney) is 9.4% as of
12/7/22. The Cost of Equity is 10.95% and the Cost of Debt is 5%.
(Value investing n.d.). WACC is basically the rate a company will pay
to secure its assets from the various capital funding sources.
(Hargrave 2022). Disney's WACC is means that for every $1
invested it must pay $0.094 to the source of capital either lenders or
shareholders.
Although Disney is a well-diversified company the top two segments
are the media streaming services and the amusement parks. In
evaluating its streaming services, the biggest challenge faced by
Disney the increase in competition from the various streaming
sources all vying for the dollar of the consumer and the decline of
services post pandemic. During the pandemic, the streaming
services had huge profits because everyone was stuck at home. All
the media companies had to find a way to keep the consumers
interested in their services, business was booming so a lot of
companies beefed up their offerings. Now post pandemic two things
are happening, the increased competition has consumers jumping
from one service to another creating unreliable and declining profits
and with other in person entertainment options now available there
is a decreased reliance on the online streaming services. b (Grimes,
2022)
Additionally, b because we are on the verge of inflation and the cost of
basic necessities, like food, water, and utilities are rising rapidly,
many consumers are evaluating the cost of these streaming
entertainment services against their basic needs. Another economic
factor that has impacted more than one of the Disney segments is
the supply chain issues. However because the company is so
diversified there is a positive outlook for the company. (Tang, 2022).
Value Investing (n.d.) Walt Disney Co
https://valueinvesting.io/DIS/valuation/wacc
Hargrave, Marshall. (2022, August 08). Weighted Average Cost of
Capital Explained with Formula and Explanation.
https://www.investopedia.com/terms/w/wacc.asp
Grimes, Christopher. (2022, November 11). Disney plans job cuts as
part of company-wide spending review.
