Tag: The Walt Disney Company (DIS)

Will the Disney-DirecTV Deal Drive New Growth?

Posted on by The INO.com Team

The Walt Disney Company (DIS) and DirecTV recently reached a deal that restores college football and other programming to the satellite TV providers over 11 million subscribers. The agreement offers enhanced choice, value, and flexibility to their mutual customers.

Consequently, Disney’s complete linear suite of networks has been restored for DIRECTV, DIRECTV STREAM, and U-verse subscribers as both companies work toward finalizing a new, multi-year deal. As the entertainment landscape shifts, DIS’ multi-channel approach could unlock new revenue streams and drive future growth.

Expanding Reach Through Traditional and Streaming Platforms

The renewed partnership between Disney and DirecTV comes at a critical time when consumer viewing habits are increasingly split between traditional linear TV and streaming services. As part of the deal, DirecTV will now offer customers more flexibility with multiple genre-specific packages, including those focused on sports, entertainment, and kids & family programming.

For instance, the agreement includes continued carriage of Disney’s entertainment, sports, and news programming from its linear portfolio, comprising the ABC Owned Television Stations, the Disney-branded channels, Freeform, the FX networks, and the National Geographic channels. Certain DirecTV packages will also include Disney’s leading streaming services—Disney+, Hulu, and ESPN+.

In a joint statement, the companies said: “DIRECTV and Disney have a long-standing history of connecting consumers to the best entertainment, and this agreement furthers that commitment by recognizing both the tremendous value of Disney’s content and the evolving preferences of DIRECTV’s customers.”

This strategic agreement bridges the gap between traditional and digital viewing preferences. DirecTV’s subscriber base, which has been slowly declining due to the rise of cord-cutting, now has access to a broader array of content options through Disney’s streaming services. For customers still tethered to satellite TV, this hybrid model offers them a reason to stay while granting Disney access to an audience that may not have subscribed to its streaming services independently.

Bundling linear TV programming with streaming services offers DIS a competitive advantage, especially as the entertainment giant looks to capitalize on both sides of the evolving content landscape. The inclusion of Disney+, Hulu, and ESPN+ in DirecTV’s packages serves multiple purposes. Firstly, it provides a gateway for traditional TV subscribers to explore Disney’s streaming offerings, potentially converting them into long-term streaming customers.

Secondly, this bundling strategy solidifies Disney’s position in the streaming wars, where competition from platforms like Netflix, Inc. (NFLX), Amazon.com, Inc.’s (AMZN) Amazon Prime, and Apple Inc.’s (AAPL) Apple TV+ is fierce.

DIS can leverage its expansive content library to meet different viewer preferences. Families may gravitate toward the kid-friendly programming on Disney+, sports enthusiasts will value the breadth of ESPN+, and fans of original series and award-winning content can indulge in Hulu’s offerings. The diversity of content will allow the company to capture a wider audience, which could drive subscriber growth and retention across its platforms.

Potential Financial Gains and a Case for Disney Stock

For investors, DIS’ multi-channel strategy is an encouraging sign. Disney has long been a dominant player in the entertainment industry, and this renewed partnership with DirecTV further underscores its ability to adapt to changing market conditions. As Disney continues diversifying its revenue streams—balancing traditional TV and the increasingly lucrative streaming business—its future earnings potential looks robust.

The inclusion of Disney+, Hulu, and ESPN+ in DirecTV’s packages provides Disney with a more sustainable and diversified revenue model, which could be particularly important as the company faces intense competition in the digital streaming segment. Disney’s unique blend of original programming, sports content, and lids & family entertainment gives it a distinct edge in attracting and retaining subscribers.

Moreover, DIS’ streaming and linear programming continues to captivate audiences and critics, with the company garnering an impressive 183 nominations at this year’s Primetime Emmy® Awards—a record high for Disney and more than any competitor.

DIS delivered an outstanding financial performance in the third quarter, beating analyst estimates for revenue and earnings as the company’s combined streaming businesses turned a profit earlier than anticipated. For the quarter that ended June 29, 2024, the company reported revenues of $23.16 billion, surpassing analysts’ expectations of $23.09 billion.

Disney’s total segment operating income grew 19% year-over-year to $4.23 billion, led by solid results for its entertainment unit, especially streaming. The entertainment segment's operating income nearly tripled year-over-year due to better performance in Direct-to-Consumer (DTC) and Content Sales/Licensing and Other.

The company’s combined streaming business, which comprises Disney+, Hulu, and ESPN+, reported an operating profit of $47 million, compared to an operating loss of $512 million in the same period of 2023. Further, the company posted an adjusted EPS of $1.39, up 35% from the previous year’s quarter. That compared to the consensus EPS estimate of $1.19.

Due to robust financial performance in the third quarter and supported by its balanced portfolio of assets, DIS set a new full-year adjusted EPS growth target at 30%. The company added that it remains on track for the profitability of its combined streaming businesses to improve in the fourth quarter, with both Entertainment DTC and ESPN+ expected to be profitable.

Bottom Line

The renewed Disney-DirecTV deal is poised to unlock new growth opportunities by expanding Disney’s reach across both traditional linear TV and streaming platforms. By bundling Disney+, Hulu, and ESPN+ with DirecTV packages, Disney will effectively tap into untapped audiences, diversify its revenue streams, and strengthen its position in the competitive streaming market.

With the company’s robust financial performance, improving profitability in the combined streaming business, and diverse portfolio, this multi-channel strategy positions Disney for continued subscriber and earnings growth, making DIS stock an attractive option for investors.

Disney’s $60 Billion Bet: Will Theme Park Expansion Drive Stock Growth?

Posted on by The INO.com Team

The Walt Disney Company (DIS) plans to invest $60 billion in theme parks and cruises over the next ten years, marking a transformative chapter for the entertainment giant. However, the question looms: Will this massive outlay drive stock growth and solidify Disney’s financial health, or does it present a high-stakes gamble fraught with potential pitfalls?

Financial Health and Stock Performance: Analyzing the Impact

Disney’s theme parks have emerged as a robust profit engine in recent years. The entertainment segment, which includes parks, cruise ships, and consumer products, contributed 60% of the company’s operating income in the most recent quarter, up from 30% a decade ago. The parks have become a crucial buffer against the challenges faced by Disney’s traditional television and video streaming business.

The new $60 billion investment plan on theme parks reflects Disney’s commitment to further capitalizing on this profitability. By enhancing attractions and increasing cruise line capacity, Disney aims to drive higher guest attendance, extended stays, and greater spending per visitor. These factors collectively contribute to revenue growth, which could bolster stock performance in the long run.

Long-Term Benefits and Risks

The capital infusion will lead to new and upgraded attractions, potentially increasing visitor satisfaction and drawing larger crowds. These investments will build upon recent attractions such as Tiana’s Bayou Adventure, inspired by Disney’s animated film The Princess and the Frog; the Guardians of the Galaxy: Cosmic Rewind roller coaster; and Tron Lightcycle/Run.

Moreover, upgraded parks and expanded cruise lines will likely generate more revenue through ticket sales, merchandise, and food services. This expanded capacity can lead to improved financial performance and, consequently, stock growth for Disney.

With intensified competition in central Florida from rival Universal Studios, which plans to open Epic Universe the following year and other emerging attractions, Disney’s investments could help maintain its market leadership and appeal, safeguarding its share of the theme park revenue.

However, potential pitfalls, including economic downturns or shifting consumer preferences, could impact the company’s financial health and stock performance. Generally, large-scale investments are vulnerable to economic shifts. An economic downturn could reduce consumer spending on leisure and travel, impacting theme parks’ attendance and profitability.

Changes in consumer tastes and expectations might also impact the success of new attractions. If DIS’ investments do not align with evolving customer preferences, the anticipated returns could fall short. Further, the maintenance and operational costs associated with new attractions and expanded facilities could strain Disney’s finances if not matched by proportional increases in revenue.

Thus, the timing of Disney’s massive investment in its theme parks is crucial. Economic indicators, such as consumer spending trends and global economic stability, will influence the success of these investments. If economic conditions deteriorate, DIS might face challenges in achieving its financial targets. Conversely, Disney’s investments could yield substantial returns if the economy remains robust or improves.

Additionally, macroeconomic factors such as inflation and interest rates could affect financing costs and operational expenses. Disney’s ability to navigate these challenges while maintaining its investment plans will be a critical factor in determining the success of this expansion strategy.

Bottom Line

Disney’s $60 billion investment in its theme parks and cruises represents a bold strategy and a high-risk venture. On one hand, it aligns with a long-term vision of growth and innovation, enhancing the company’s competitive positioning. The parks have historically been a vital revenue source, and expanding them can be seen as a strategic move to ensure sustained profitability.

On the other hand, the substantial capital required for such projects introduces enhanced financial risk, particularly if macroeconomic conditions become unfavorable. With the global economy facing uncertainties, including inflationary pressures and geopolitical tensions, the timing of Disney’s investment might be seen as a gamble. The success of this strategy depends heavily on DIS’ ability to effectively execute its plans and adapt to changing economic conditions or consumer preferences.

Therefore, investors should weigh the potential for growth against the inherent risks, keeping a close eye on both economic trends and Disney’s operational performance.

Walt Disney (DIS) Pre-Earnings Analysis – What to Expect

Posted on by The INO.com Team

The Walt Disney Company (DIS), a leading media and entertainment company, posted mixed results for its fiscal 2023 third quarter. The company reported third-quarter adjusted EPS of $1.03, beating analysts’ expectations of $0.98. Its revenue came in at $22.33 billion, lower than the consensus estimate of $22.53 billion.

The company is set to report its fourth quarter and fiscal full year 2023 financial results on November 8, 2023, after the market closes. Analysts expect DIS’ revenue and EPS for the fourth quarter (ended September 2023) to increase 6.2% and 137.6% year-over-year to $21.41 billion and $0.71, respectively.
For the fiscal year 2023, the company’s revenue and EPS are expected to grow 7.7% and 4.2% from the prior year to $89.09 billion and $3.68, respectively.
Shares of DIS have plunged more than 18% over the past six months and 5% year-to-date.

Let’s review in detail what has happened over the past few months and discuss the key factors that could influence DIS’ performance in the near term:

Recent Developments to Further Streaming Objectives

On November 1, DIS announced that it would acquire the remaining 33% stake in Hulu, LLC held by Comcast Corp.’s (CMCSA) NBC Universal (NBCU) for at least $8.60 billion, a deal that would give DIS complete control of the streaming service. Disney had run Hulu since 2019, when Comcast gave up its authority to Disney and effectively became a silent partner.

On September 11, DIS and Charter Communications, Inc. (CHTR) announced a transformative, multi-year distribution agreement that maximizes consumer value and supports the linear TV experience as the industry evolves. As part of the agreement, the majority of DIS’ networks and stations will be restored to Spectrum’s video customers.

Under this deal, Disney+ Basic ad-supported offering will be included in Spectrum TV Select Video packages. Also, ESPN+ will be included in the Spectrum TV Select Plus Video package, and ESPN’s flagship direct-to-consumer Service will be made available to Spectrum TV Select subscribers upon launch.
In a joint statement, Robert A. Iger, DIS’ CEO and Chris Winfrey, President and CEO at CHTR, said, “Our collective goal has always been to build an innovative model for the future. This deal recognizes both the continued value of linear television and the growing popularity of streaming services, while addressing the evolving needs of our consumers.”

Also, on August 9, Disney+ announced that an ad-supported offering will be available in select markets across Europe and Canada starting November 1 after the successful ad-tier launch in the U.S.

Plans to Double Investment in Parks and Cruises Business

DIS said in a securities filing it will nearly double its planned investment in its parks segment to more than $60 billion over 10 years. With all other divisions struggling, Disney’s theme parks, experiences and products segment has been a bright spot in the third quarter. The division saw a 13% rise in revenue to $8.30 billion, mainly driven by strength from its international parks.

But the company’s domestic parks, particularly Walt Disney World in Florida, have witnessed a slowdown in attendance and hotel room occupancy.

Bleak Financial Performance in the Last Quarter

For the third quarter that ended July 1, DIS reported revenues of $22.33 billion, up 3.8% year-over-year, primarily driven by growth in its parks, experiences and products division. However, its top-line numbers came short of analysts’ expectations.

Revenues and operating income from the Disney Media and Entertainment Distribution segment dropped 1% and 18% year-over-year to $14 billion and $1.13 billion, respectively.

The company reported $2.65 billion in restructuring and impairment charges, dragging it to a rare quarterly net loss. Most of these charges were what DIS called “content impairments” related to pulling content off its streaming platforms and ending third-party licensing agreements. Disney’s net loss was $460 million, or $0.25 per share, compared to net income of $1.41 billion, or $0.77 per share, in the prior year’s quarter.

Excluding those impairments, the company recorded an adjusted EPS of $1.03, compared to $1.09 during the year-ago period.

Subscriber losses also continued, with the company reporting 146.1 million Disney+ subscribers during the third quarter, a decline of 7.4% from the prior quarter. Most subscriber losses were from Disney+ Hotstar, where Disney witnessed a 24% drop in users after it lost the rights to Indian Premier League cricket matches.

Disappointing Historical Growth

Over the past three years, DIS’ revenue grew at a CAGR of 8.7%. However, the company’s EBITDA and net income declined at CAGRs of 5.7% and 28.5%, respectively. Its EPS decreased at a CAGR of 31.1% over the same period.

Also, the company’s tangible book value and levered free cash flow declined at respective 4.6% and 6.5% CAGRs over the same time frame.

Streaming Division Faces Several Challenges

Global media and entertainment conglomerate DIS’ streaming division lost $512 million in the fiscal 2023 third quarter, compared to $1.06 billion during the same quarter of 2022. It brings its total streaming losses since 2019, when Disney+ was introduced, to more than $11 billion.

To make the streaming business more profitable, DIS’ CEO Bob Iger has shifted the focus at Disney+ from quick subscriber growth, which requires expensive market campaigns, to making more money from the existing Disney+ subscribers. The price for access to an ad-free version of Disney+ increased to $13.99 per month beginning October 12, previously $10.99 per month.

The company also increased the price of Hulu without ads to $17.99 per month, a 20% price hike. However, the monthly price of Disney+ and Hulu’s ad-based tiers and the annual price of ad-based Hulu remained unchanged.

“We’re obviously trying with our pricing strategy to migrate more subs to the advertiser-supported tier,” Mr. Iger told analysts on a conference call.
Along with this pricing news, the company announced it will roll out tactics to mitigate password sharing.

A primary challenge Disney faces is heightened competition in the streaming industry. Among various video streaming giants, including Netflix, Amazon Prime Video, and emerging entrants such as HBO Max and Apple TV+, DIS must differentiate itself in terms of content quality and pricing to stand out in this crowded market.

Further, as consumers continue to feel the pressure of increasing prices and persistent inflation, they will cut back on their media and entertainment spending.

Continued Issues in Media Business

The company still relies on old-line channels such as ESPN, its flagship sports brand, and ABC for approximately a third of its operating profits. Cord-cutting, sports programming costs, and a soft advertising market hurt these outlets. DIS’ traditional channels had $1.90 billion in third-quarter operating income, a decline of 23% from a year earlier.

It was the second straight quarter in which Disney’s traditional TV business reported a sharp drop in operating income. The company cited lower ad sales at ABC, partially due to viewership declines, lower payments from ESPN subscribers, and increased sports programming costs.

Bottom Line

While DIS’ turnaround plan, including a mix of price hikes across its streaming operations, increasing ads, cutting costs, and other strategic initiatives, could drive long-term growth, the company grapples with several challenges. In August, Disney’s shares hit a new nine-year low below $84 as investors were unconvinced with CEO Iger’s turnaround plan.

The media and entertainment giant posted mixed financial results in the last reported quarter, plagued by streaming woes and increased restructuring costs resulting from pulling content from its platforms.

Further, DIS’ short-term prospects seem uncertain as the company continues to struggle with making its streaming business profitable, improving the quality of its films, and the slowdown in the traditional media business, which is challenged by declining subscribers and a soft advertising market.
Disney also faces heightened competition. The streaming industry is exceptionally competitive, and Disney must strike a proper balance between content quality and prices to stand out in this crowded market and be profitable.

Given its deteriorating financials, decelerating profitability, and uncertain near-term prospects, it could be wise to avoid this stock now.

4 Streaming Stocks to Buy Instead as Netflix Faces Lawsuit

Posted on by The INO.com Team

Streaming giant Netflix, Inc. (NFLX) finds itself in the center of a lawsuit over the upcoming Zack Snyder sci-fi epic Rebel Moon. NFLX has been sued for axing a gaming development contract based on filmmaker Snyder’s much-anticipated franchise, originally created as a “Star Wars” movie.

On September 28, 2023, Evil Genius Games filed a lawsuit against NFLX at the U.S. District Court in the Central District of California. Evil Genius Games is a popular developer and publisher of tabletop role-playing games based on major motion picture franchises.

The plaintiff has claimed that it had begun working with NFLX earlier this year to develop a tabletop role-playing game (TTRPG) based on Snyder’s “Rebel Moon,” and the game’s release was supposed to have coincided with the release of the first film’s streaming release on December 22, 2023.

According to the plaintiff, when the two parties started working on the project earlier this year, NFLX had a Rebel Moon movie script, a rough idea about the Rebel Moon universe, and a few cursory graphical assets. However, the script was missing background information vital to the story.

In the court documents, Evil Genius claimed that they not only did the work they were required to do but also supplied all the missing pieces and created a well-integrated backstory for the whole franchise. The plaintiff came up with a 228-page World Bible, a 430-page Player’s Guide, and a 337-page Game Master’s Guide.

Evil Genius had paid NFLX for a license and agreed to share profits from the licensed articles with NFLX. Despite having collaborated for months, NFLX decided to pull the plug on the project on May 25, weeks after the work was finalized and turned over to the streamer.

NFLX alleged that Evil Genius had violated the confidentiality agreement for “Rebel Moon” and violated its trust by sharing artwork at an industry trade show in March 2023. However, the plaintiff maintains that they had acquired NFLX’s permission to show artwork from the game at the 2023 Game Manufacturers Associate Exposition to “create some industry buzz” for the project.

According to the court documents, Evil Genius alleged that two NFLX employees were present at the event and helped hand out materials to retailers at the show. The legal filing states that “It became clear that Netflix was simply using the alleged breach and termination to hijack (Evil Genius’) intellectual property and prevent (Evil Genius’) from releasing the game.”

Evil Genius CEO David Scott said, “Our aim is to ensure our team is recognized for their fantastic work, and that we can release this game for millions of enthusiasts to enjoy. It’s disheartening to see Netflix backpedal on content that was jointly showcased and had received their prior consent. We urge our supporters to contact Netflix and Zack Snyder to push for the release of this game.”

While the allegations on NFLX are severe, the streamer has yet to comment on the lawsuit. In this scenario, investors could look to buy streaming stocks Comcast Corporation (CMCSA), The Walt Disney Company (DIS), Roku, Inc. (ROKU), and Paramount Global (PARA) as they are likely to benefit from NFLX’s bad press.

Let’s delve into the fundamentals of these stocks.

Comcast Corporation (CMCSA)

CMCSA is a media and technology company. Its segments include the Cable Communications segment, Media, and the Studios segment, which includes film and television studio production and distribution operations. The company has three primary businesses: Comcast Cable, NBCUniversal, and Sky.

CMCSA’s revenue grew at a CAGR of 4.6% over the past three years. Its EBITDA grew at a CAGR of 4.1% over the past three years. In addition, its EBIT grew at a CAGR of 4.7% in the same time frame.

CMCSA’s revenue for the second quarter ended June 30, 2023, increased 1.7% year-over-year to $30.51 billion. Its adjusted EBITDA rose 4.2% over the prior-year quarter to $10.24 billion. The company’s adjusted net income increased 4.8% year-over-year to $4.72 billion. Also, its adjusted EPS came in at $1.13, representing an increase of 11.9% year-over-year.

For the quarter ended September 30, 2023, CMCSA’s EPS and revenue are expected to decline 1.4% and 0.4% year-over-year to $0.95 and $29.73 billion, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters.

The Walt Disney Company (DIS)

DIS operates as an entertainment company worldwide. The company engages in film and episodic television content production and distribution activities. It operates through two segments, Disney Media and Entertainment Distribution; and Disney Parks, Experiences, and Products.

On September 11, 2023, DIS and Charter Communications (CHTR) announced a transformative, multiyear distribution agreement to maximize value for consumers and support the linear TV experience. Due to the deal, most DIS networks and stations will be restored to Spectrum’s video customers.

DIS’ revenue grew at a CAGR of 8% over the past three years. Its EBIT grew at a CAGR of 4.6% over the past three years. In addition, its EBITDA grew at a CAGR of 2.5% in the same time frame.

For the third quarter ended on July 1, 2023, DIS’ revenues increased 3.8% year-over-year to $22.33 billion. Its net loss attributable to DIS came in at $460 million, compared to a net income attributable of $1.41 billion in the prior-year quarter.

The company’s loss per share came in at $0.25, compared to an EPS of $0.77 in the prior-year quarter. Also, its cash provided by continuing operations increased 45.8% year-over-year to $2.80 billion. In addition, its free cash flow increased 775.4% year-over-year to $1.64 billion.

Analysts expect DIS’ EPS and revenue for the quarter ended September 30, 2023, to increase 153.2% and 6.4% year-over-year to $0.76 and $21.44 billion, respectively.

Roku, Inc. (ROKU)

ROKU operates a TV streaming platform. The company operates in two segments: Platform and Devices. Its streaming platform allows users to find and access TV shows, movies, news, sports, and others. The company also provides digital advertising and related services. In addition, it offers billing services; and brand sponsorship and promotions, as well as manufactures, sells, and licenses smart TVs under the Roku TV name.

On August 31, 2023, ROKU and TV Azteca announced a strategic partnership that will enable brands and agencies to purchase TV streaming advertising on the Roku platform in Mexico through TV Azteca.

ROKU’s International Advertising Vice President Mirjam Laux said, “The collaboration with TV Azteca increases our reach in the market and is a significant step to expand our growing ad sales business in Mexico. Working with TV Azteca, a trusted media group with deep connections to brands and advertisers, helps us to accelerate our advertising business and create more impactful marketing.”

ROKU’s revenue grew at a CAGR of 33.6% over the past three years. Its Tang Book Value grew at a CAGR of 32.3% over the past three years. In addition, its Total Assets grew at a CAGR of 31.1% in the same time frame.

ROKU’s total net revenue for the second quarter ended June 30, 2023, increased 10.8% year-over-year to $847.19 million. Its total gross profit rose 6.5% year-over-year to $378.27 million. The company’s net loss narrowed 4.2% year-over-year to $107.60 million. Also, its loss per share narrowed 7.3% year-over-year to $0.76.

Street expects ROKU’s revenue for the quarter ended September 30, 2023, is expected to increase 11.6% year-over-year to $849.38 million. Its EPS for the same quarter is expected to decline 124.5% year-over-year to $1.98. It surpassed the Street EPS estimates in each of the trailing four quarters.

Paramount Global (PARA)

PARA operates as a media and entertainment company worldwide. The company operates through TV Media, Direct-to-Consumer, and Filmed Entertainment segments.

On August 7, 2023, PARA and KKR announced signing an agreement pursuant to which KKR will acquire Simon & Schuster. PARA’s President and CEO Bob Bakish said, “We are pleased to have reached an agreement on a transaction that delivers excellent value to Paramount shareholders while also positioning Simon & Schuster for its next phase of growth with KKR.”

“The proceeds will give Paramount additional financial flexibility and greater ability to create long-term value for shareholders while also delivering our balance sheet,” he added.

PARA’s revenue grew at a CAGR of 5.7% over the past three years. Its levered FCF grew at a CAGR of 2.3% over the past three years. In addition, its Total Assets grew at a CAGR of 2.7% in the same time frame.

For the fiscal second quarter ended June 30, 2023, PARA’s revenue declined 2.1% year-over-year to $7.62 billion. Its adjusted OIBDA declined 37% over the prior-year quarter to $606 million.

The company’s adjusted net earnings from continuing operations attributable to PARA declined 81.4% year-over-year to $80 million. Its adjusted EPS from continuing operations attributable to PARA came in at $0.10, representing a decline of 84.4% year-over-year.

For the quarter ended September 30, 2023, PARA’s revenue is expected to increase 4.2% year-over-year to $7.21 billion. Its EPS for the same quarter is expected to decline 70.9% year-over-year to $0.11.

Potential Lawsuit Could Spell Trouble for Anheuser-Busch InBev (BUD); Check Out These 2 Stocks Instead

Posted on by The INO.com Team

In a piece on April 30, we discussed how an ill-fated decision by Anheuser-Busch InBev SA/NV (BUD) to feature trans influencer Dylan Mulvaney in an ad campaign to celebrate the end of March Madness and promote a sweepstakes contest for its brand, Bud Light, stirred up controversy and outrage from outspoken conservatives over transgender rights.

Earnest efforts to contain damage and restore its brand image included parting ways with two top marketing executives who supervised the ad campaign and releasing an ad featuring its signature Clydesdale horse mascot to invoke patriotic sentiments in its patrons.

However, amid widespread calls for a boycott, Bud Light has seen its sales plummet by about 25% from the previous year, according to data from consulting firm Bump Willams. Consequently, the beer maker lost its top spot in the U.S. beer market last month to Modelo Especial by Constellation Brands, Inc. (STZ), and its parent BUD saw its shares fall from roughly $66 to $58.

While BUD believed that it might have seen the worst and that the backlash would eventually blow over, with 2024’s race to the White House underway, given the recent noise surrounding the beverage company, it ended up courting further unwanted attention.

Florida’s Governor, Ron DeSantis, who is also running for the Republican presidential nomination while riding a wave of anti-"woke" rhetoric, has been involved in a legal tussle with The Walt Disney Company (DIS) for over a year over alleged “targeted campaign of government retaliation” after the company’s former CEO spoke up about the state's classroom (so-called "Don't Say Gay") education bill.

To add fuel to his efforts to hold accountable corporations and other entities he deems are pushing “woke” progressive political ideology, the governor has now trained his guns on BUD.

DeSantis, who oversees the board of the Florida Pension Fund as a trustee along with the state’s attorney general and chief financial officer, both also Republicans, has accused the company of neglecting its stakeholders and pensioners by associating with “radical social ideologies.”

By ordering his government to investigate whether BUD breached its duties to shareholders, the conservative politician could potentially bring a derivative lawsuit against the company on behalf of the fund's shareholders.

In his letter to Lamar Taylor, the interim director of the State Board of Administration, the state agency that manages Florida’s retirement funds for public workers, DeSantis wrote, “We must prudently manage the funds of Florida’s hardworking law enforcement officers, teachers, firefighters, and first responders in a manner that focuses on growing returns, not subsidizing an ideological agenda through woke virtue signaling.”

Since, in the words of DeSantis, “All options are on the table and woke corporations that put ideology ahead of returns should be on notice,” BUD’s time in turbulence seems unlikely to end anytime soon.

The company responded, “Anheuser-Busch InBev takes our responsibility to our shareholders, employees, distributors, and customers seriously.” The spokesperson further added, “We are focused on driving long-term, sustainable growth for them by optimizing our business and providing consumers products to enjoy for any occasion.”

While DIS’ current CEO, Bob Iger, has expressed his determination to back and persist with his company’s legal challenge, a stance that has even been appreciated by Nike’s CEO, it remains to be seen how BUD responds to being in political crosshairs and under legal fire.

According to experts, changing demographics suggest that Bud Light’s inclusive ad campaigns make good sense in the long run and are expected to keep the brand in what, according to BUD’s CEO, is “the business of bringing people together over a beer.”

However, the soup the brand has landed in might warm up the prospects of two other beverage stocks. While the “woke-free” beer being brewed by “Conservative Dad” may not make the cut, here are some contenders to look out for.

Heineken N.V. (HEINY) is a beverage company headquartered in Amsterdam, Netherlands, that is involved in brewing and selling beer. Its offerings consist of beer, soft drinks, and cider. The company operates through five segments: Africa, Middle East & Eastern Europe; Americas; Asia Pacific; Europe and Head Office; and Other/eliminations.

On May 31, HEINY announced the completion of the purchase of its shares worth €333 million ($368.35 million) from FEMSA as part of the sell-down offering by the latter. The purchase, which was funded from HEINY’s existing cash resources and credit facilities, could increase the intrinsic value of the holdings of existing shareholders.

On April 26, HEINY announced the completion of its acquisition of Distell Group Holdings Limited (Distell) and Namibia Breweries Limited (NBL), which have been combined with HEINEKEN South Africa into a new HEINEKEN majority-owned business to capture significant growth opportunities in Southern Africa.

The combined businesses will be known as ‘HEINEKEN Beverages. The rebranding reflects the new company’s multi-category portfolio and commitment to delivering high-quality beverages to consumers across the continent.

Ahead of its July 31 earnings release, HEINY’s revenue for the fiscal second quarter is expected to increase by 33% year-over-year to $9.39 billion. For the entire fiscal year, both revenue and EPS are expected to increase by 15.1% and 16.5% year-over-year to $35.28 and $2.91, respectively.

Ambev S.A. (ABEV), a subsidiary of Interbrew International BVT, is a beverage company headquartered in Sao Paolo, Brazil, that distributes and sells beer, carbonated soft drinks (CSDs), and other non-alcoholic and non-carbonated (NANC) beverages across the Americas. The company operates through three geographical segments: Latin America North; Latin America South; and Canada.

On April 25, ABEV’s Board of Directors approved and homologated the issuance of new common shares as a result of the exercise, by certain beneficiaries, of stock options, within the scope of the company’s Stock Option Plan. This reflects the investors’ confidence in the company’s prospects.

Consequently, on May 18, ABEV announced a share buyback program for the repurchase of shares issued by the company up to the limit of 13,000,000 common shares with the primary purpose of covering any share delivery requirements contemplated in the company's share-based compensation plans or to be held in treasury, canceled, and/or subsequently transferred.

Ahead of its earnings release on August 3, analysts expect ABEV’s revenue to increase by 17.2% year-over-year to $4.03 billion. The company’s revenue is expected to grow by 15.9% year-over-year to $17.73 billion for the entire fiscal year. Moreover, the company has surpassed consensus EPS estimates in each trailing four quarters.