Walt Disney Co’s (NYSE:DIS) had amazing success with Black Panther. Disney earned more than $240 million domestically, and $169 million worldwide before opening in China, Japan or Russia. But Black Panther is far from the only positive catalyst for Disney stock right now.
Black Panther Beats Expectations
Ahead of the Black Panther release, positive reviews hinted that the movie would resonate with moviegoers. But the movie did much more than that.
Theaters like AMC Entertainment Holdings Inc. (NYSE:AMC) will have benefited from the strong showing as well. Though admittedly, the movie theater chain will need a few quarters of positive earnings before investors grow interested in its stock.
Disney stock shares are off and the has stock failed to break above $112 on at least four occasions since Dec. 2017. The box office success of Black Panther however, may give DIS the positive momentum it needs.
Disney Park Ticket Prices Raised
Black Panther isn’t the only thing bringing in more money for Disney, however.
On Feb. 12, Disney raised the ticket prices for some of its single-day tickets to its theme parks by nearly 10 percent. Its Disneyland Resort in Anaheim, Calif., gets the biggest increase, rising from $124 to $135.
Disney can afford to do this. Since line-ups and crowds at the parks are excessive, chances are very high that attendance numbers will not drop. And even if they do, total revenue from the higher prices will more than make up for the drop in visitors.
Fortunately, Disney is not raising the prices of multi-day passes just yet. Management is likely gauging the market’s reaction to the single-day price increases first.
Disney might have needed to offset the cost of building its new Star Wars theme-park area, set to open next year. Or its new Toy Story Land will open June 30.
But I think that once we see a full quarter of sales results following the opening of these new attractions, DIS stock may go “to infinity and beyond.”
At a P/E of 18 times and a forward P/E of 14 times, Disney stock looks inexpensive. The company’s trailing EPS growth was 13 percent. This will grow 11 percent in the next 5 years. So at a PEG of 1.7 times, investors will likely benefit from the stock appreciating in the quarters ahead.
Seasonally speaking, Disney stock trends to rally strongly during the holiday period, timed to the release of a Star Wars movie.
ESPN Headwind is Dissipating
The Media Networks is the biggest segment for Disney by revenue, accounting for $6.24 billion in its first quarter. Because of this, ESPN’s underperformance is likely holding DIS performance back.
Disney will soon launch a new ESPN app for $4.99 a month. It will have “an incremental thousands of hours of programming,” according to Disney CEO Bob Iger.
However, an ESPN subscription is will still be required to access the app (which only offers bonus content, not what is already broadcast). So while an audience does exist for this content, it may not be very large.
And television subscriptions fell 3 percent year-over-year, so this app will not make enough to offset those declines.
The library of content from ESPN is far less than that offered by Netflix, Inc. (NASDAQ:NFLX). Yet when speculative shareholders value NFLX stock at over 65 times forward earnings compared to 14 times for Disney, the margin of safety is bigger for the latter.
Especially when you consider that Disney’s full streaming service is due out in 2019.
Bottom Line for Disney Stock
Investors looking for exposure in the media and entertainment market should first consider Disney stock. Analysts have an average price target of $119.67 (per finbox.io) for DIS.
And the entertainment giant hardly ever disappoints. Blockbuster movie hits are just a bonus.
As of this writing, Chris Lau held no positions in the aforementioned securities.