Back in January 2019, a story came out about how Galaxy’s Edge was jacking up prices for Star Wars fans. It looks like theymay be jacking them up again.
Yahoo Finance reports that Disney is in massive debt:
These 4 Measures Indicate That Walt Disney (NYSE:DIS) Is Using Debt Extensively
What Is Walt Disney’s Debt?
You can click the graphic below for the historical numbers, but it shows that as of June 2019 Walt Disney had US$58.2b of debt, an increase on US$23.7b, over one year. However, because it has a cash reserve of US$6.73b, its net debt is less, at about US$51.5b.
How Healthy Is Walt Disney’s Balance Sheet?
According to the last reported balance sheet, Walt Disney had liabilities of US$44.6b due within 12 months, and liabilities of US$59.6b due beyond 12 months. Offsetting these obligations, it had cash of US$6.73b as well as receivables valued at US$15.7b due within 12 months. So it has liabilities totalling US$81.8b more than its cash and near-term receivables, combined.
This deficit isn’t so bad because Walt Disney is worth a massive US$249.5b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk.
Walt Disney’s EBIT growth rate and net debt to EBITDA definitely weigh on it, in our esteem. But its interest cover tells a very different story, and suggests some resilience. We think that Walt Disney’s debt does make it a bit risky, after considering the aforementioned data points together. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. In light of our reservations about the company’s balance sheet, it seems sensible to check if insiders have been selling shares recently.
Disney Will Be Bloated With Debt After Buying Fox — Disturbing Problem?
Debt: An Ugly Word
Now, debt is an ugly word on Wall Street, and tossing around a nine-figure bomb like $13.7 billion will grab some headlines — providing Disney bears with fodder. But this is worth a deeper dive, because the headline number feels misleading.
Disney pulled in roughly $9 billion of net income over the past year, so in comparison to net income, the debt figure is large. But the bigger question becomes: Is it serviceable?
Before this announced purchase, Disney already had a debt-to-equity ratio — short- and long-term debt divided by total equity — of 0.61.
Fox’s $13.7 billion of additional debt all rolls into number;
Disney acquires a conservative 80% of Fox’s $16.3 billion of equity and $52 billion in assets (as valued by the purchase).
Under that scenario, Disney’s new debt-to-equity measure will reach approximately 0.72. That would continue a disturbing trend that began back in 2014, when Disney’s debt-to-equity began rising. It measured just 0.31 in 2013, but has climbed every year since then. The company’s debt-to-equity ration currently measures 2x what it did in 2013 and will increase even more after this deal closes.
So how is Disney going to pay off this debt? By raising prices. piratesandprincesses.net reports:
New Pressed Penny Machines at Walt Disney World Come with New Costs
I’ve got good news and bad news.
The good news is that there are some new pressed penny machines at Walt Disney World that will take credit cards or cash. The bad news is that they now want $1.00 to make a pressed penny instead of .51. For the added expense of .49 they will give you the penny.
You can use your credit card but you have to buy all of them at a time to do so.
Walt Disney World News Today reports:
Price Increases Take Over Toydarian Toymaker in Star Wars: Galaxy’s Edge at Disneyland
Despite constant merchandise supply shortages plaguing the specialty shop in Galaxy’s Edge, it appears that with waves of re-stocking come price increases, as well. We recently saw a slew of prices go up over at Dok-Ondar’s, who thought to start charging a bit extra for the fancy legacy lightsabers. Across the Black Spire Marketplace, it’s also worth noting that Loth Cats are now $49.99 (up from $44.99) at Creature Stall as well.
Over at Toydarian Toymaker, Zabaka the toymaker has realized the popularity of his wares and decided to raise prices as well. While we felt most of these toys were alright in the under $20 range, charging more than that for any of these feels like a bit much. However, it seems that prices are being leveled across both Disneyland and Disney’s Hollywood Studios, which is leading to overall price increases. Let’s take a look of all of the increases across the tiny shop.
But The Mercury News thinks that at some point, some people will just stop paying.
Have Disneyland fans finally reached their limit?
The recently announced drop in attendance at Disney’s U.S. parks could be a sign that visitors won’t pay endlessly.
For years it seemed that Disneyland could keep raising prices at will and fans would continue to fill the parks. Disney didn’t even need to keep building new attractions. Since Cars Land opened in 2012, Disney California Adventure had gotten only overlays such as Guardians of the Galaxy — Mission: Breakout! and Pixar Pier, while Disneyland itself had not gotten an all-new permanent major attraction since Indiana Jones Adventure opened in 1995.
Finally, this spring, Disneyland fans collectively said, “enough.” If the Disneyland Resort wants more people to come to its parks, fans want to see either lower prices or more new attractions in return. With the recent discounts and new Flex Pass, it appears that Disney might have heard that message.
Now we should not forget that Disneyland ultimately made more money last quarter despite the lower attendance, thanks in part to the fans who did show up to Galaxy’s Edge buying so many $100 droids and $200 lightsabers. Even when it loses, Disney wins.
But not even Disney can keep winning forever. With this dip in attendance, Disney might now finally have discovered that ceiling beyond which it no longer can keep raising prices without consequences.
But maybe this is all part of Disney’s fake price scheme.
Thanks to Clownfish for the tip, who comments on these stories.