Walt Disney Co (DIS) stock has lagged the market this year, with shares down 5% to the 0.5% gain in the benchmark S&P 500 Index.
Hopefully, DIS stock will get back on track, and if Shanghai Disneyland has anything to do with it, that’ll happen sooner rather than later.
As many shareholders know, Disney is opening its first theme park in China in June, and the volume of visitors is expected to be absolutely massive. Given some early metrics, those expectations are on point.
DIS Stock: Banking on Shanghai
The idea to put a theme park in a densely populated part of China is simple and brilliant. Disney brags that more than 300 million Chinese consumers live within a three-hour distance of the nearly opened Shanghai Disneyland.
That’s five times the combined 60 million people that live in Florida and California, the states where Disney’s flagship theme parks, Disney World and Disneyland, are located. Add in the fact that you can also expect Chinese tourists with the means to flock to the new park, and you’ve got yourself a winner.
But perhaps the best sign yet that Shanghai Disneyland will be a big money-maker for DIS stock owners is the visitor count on the yet-to-be-opened park this month. In the last 23 days, nearly 1 million visitors (960,000, to be exact) have come to check out Disney’s magic.
While many are interested in checking out what the park looks like before it opens to the public next month, DIS stock owners will be happy to know that there’s also a retail section surrounding the park called “Disney Town” that includes restaurants and stores and the like. That’s where these 1 million Chinese were spending their dough these past three weeks.
Those numbers will undoubtedly spike upon the mid-June opening, and DIS stock should benefit from the bump in business.
While it’s true that Disney’s Media Networks segment (notably ESPN) is its largest revenue driver, Parks and Resorts isn’t far behind, and could end up overtaking the former in time, especially as the results from Shanghai Disney begin pouring in.
In fiscal 2015, Parks and Resorts took in $16.16 billion in revenue, and operating income from that segment rose 14% year-over-year, slightly better than the 13% overall increase that DIS stock owners saw.
I think we’ll likely see more dramatic increases in fiscal 2016, which concludes at the end of September, and in fiscal 2017. Disney’s partner on the Shanghai resort, Shanghai Shendi Group, expects 10 million visitors per year. Considering adult ticket prices are $57 on off days and $75 during peak periods and weekends, the cash should soon start pouring in.
Disney stock owners should also remind themselves that the ticket price won’t be the only thing visitors are spending on. There’s also a resort there, after all, and millions each year will pay good money to stay for a night or two. Food and keepsakes will also set them back a few bucks.
Not to mention: Do we really think there will only be 10 million visitors per year? A million people showed up in 23 days to see a park that hasn’t even opened yet to blow money in Disney Town. Those numbers are very, very promising, and finally give shareholders a reason to smile.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.