Why Disney Is Down on a Strong Day for the Dow

A merger of rivals may have scared some investors away from Disney today.

Jul 16, 2014 at 3:30PM

The Dow Jones Industrial Average (DJINDICES:^DJI) is up 65 points late in today's trading session following a solid earnings report from Intel showing far better performance from PCs than expected. Earnings season seems to be proving profitable so far; we saw expectation-beating results among financials last week.

But The Walt Disney Company (NYSE:DIS) is down 1% after rising briefly this morning. The reason is a potential merger of two of the company's rivals.

Fox tries to buy Time Warner
It was confirmed by Time Warner (NYSE:TWX) today that Twenty-First Century Fox (NASDAQ:FOX) tried to buy the company for as much as $80 billion. It's reported that Fox offered $85 per share for Time Warner but that Time Warner's board of directors wasn't happy that the offer was for nonvoting shares, leaving the Murdoch family firmly in control of a combined company.  

So why do Disney's investors care? Disney currently owns the most valuable assets in media with ABC, ESPN, and a number of other television stations. A combined Time Warner and Fox could take over that top spot and give Murdoch the ability to leverage the company's assets in negotiations with cable companies.

Dis Theme Park Image

Theme parks are the second-most profitable business for Disney, trailing only media.

But in the long term that's not all bad for Disney. Further consolidation of media companies would leave only four major players -- including NBCUniversal and Viacom -- and give them further leverage over cable companies and consumers of digital media. That may lead to higher prices and slower innovation in areas like streaming media, but it wouldn't be bad for shareholders.

It's also worth noting that Disney's model of creating value, from the box office to television to theme parks, is unmatched in the industry, so the profit machine that has enriched shareholders is still intact.

Disney's stock may be down today on the Fox-Time Warner news, but any deal may actually be a positive for shareholders because it would reduce competition in the media space. It's times like this when a long-term view is needed, because in the short term the market's reaction can be the opposite of what it should be.

Your cable company is scared for more reasons than one
Cable companies are being bombarded by stronger media companies as well as streaming options for consumers. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers