The WACC of The Walt Disney Company (Disney) is 9.4% as of
12/7/22. c The Cost of Equity is 10.95% and the Cost of Debt is 5%.
(Value investing n.d.). c 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. c During the pandemic, the streaming services
had huge profits because everyone was stuck at home. c 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. c 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. (Grimes, 2022)
Additionally, c 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.
