Avengers: Endgame, the final installment of the first era of the Marvel series, hit movie theaters this past weekend. The movie from Disney (NYSE:DIS) broke every single record imaginable., but, despite that great performance, DIS stock is lower this week than it was at the end of last week.
I’m not exaggerating about the performance of Avengers . According to theWrap, Endgame broke 144 (and counting) box office records in its opening weekend, including biggest opening weekend domestic and worldwide box office haul, by a hefty margin.
In response, DIS stock traded slightly higher on Monday morning. But DIS stock reversed course, gave up those gains, and yesterday closed below its Friday levels.
DIS stock has dropped because some investors think Endgame is, well, the end game. After all, this is the final movie in what has been a decade-long string of Marvel superhero movies. Sure, it broke box office records. But what’s next? After all the Endgame hype dies down, what catalyst will arise next to push DIS stock even higher?
Investors shouldn’t be concerned about that. Such concerns are unnecessarily short-sighted. Endgame is the end game for the Avengers series. But it is far from the end game for DIS stock. Instead, it is just the beginning of a breakout for DIS stock.
2019 is littered with a plethora of positive catalysts for Disney. Endgame is just the first of those catalysts. Ultimately, all these positive catalysts will keep the current owners of Disney stock from selling, cause additional investors to buy DIS stock, and keep Disney stock flying high into the end of the year.
Endgame Smashes Expectations
Endgame was supposed to smash box office records. But the actual opening weekend results smashed even the highest expectations for the movie, and were nothing short of jaw dropping.
Heading into the weekend, domestic box office sales during the top 20 biggest opening weekends ever measured between roughly $150 million and $250 million. Endgame took home $350 million in the U.S. during its opening weekend. That is head and shoulders above any other movie in history. Normally, big movies generate about 25%-40% of their total U.S. box-office revenue during their opening weekends. At the midpoint, that would put Endgame ‘s domestic box office total well over $1.1 billion, or more than 20% above the current domestic box office record holder, Star Wars: The Force Awakens,
In other words, Endgame is on track to be the most lucrative movie ever by a long shot.
Naturally, these record box office results will create a huge tailwind for Disney’s studio business. Revenues and operating profits from the studio business will be up by a large amount this quarter. That will provide a nice boost to Disney’s overall numbers, which should in turn lift Disney stock.
DIS Stock Has Multiple Catalysts in 2019
Despite the record results from Endgame, some investors are concerned about its ability to boost Disney stock over the longer term. After all, Endgame has been out just one weekend, and it won’t improve Disney’s numbers much beyond the current quarter, they say.
Such concerns lack merit. Endgame is just the first of many catalysts which will provide a boost to Disney’s numbers and DIS stock throughout 2019.
Next up is a highly anticipated remake of the Aladdin movie in late May. Shortly thereafter, Disneyland’s newest expansion – Star Wars-themed Galaxy’s Edge – will have its grand opening, and it will be in open throughout the busy summer season.
During that busy summer season, Disney will also release the movie Toy Story 4 in late June and a remake of the movie Lion King in late July (some observers think the latter movie will top even Endgame at the box office). In early November, Disney will launch its new streaming service, Disney+. In late November, the movie Frozen 2 will hit theaters. And, a month after that, the last movie in the latest Star Wars trilogy is due out.
In other words, calendar 2019 should be a record year for Disney. Among its upcoming positive catalysts are a theme-park expansion, a slate of record-breaking movies, and a highly anticipated new streaming service which could cause this company’s growth to meaningfully accelerate.
Why would anyone sell DIS stock ahead of all that, especially with the stock trading at just 20 times analysts’ consensus forward earnings estimate? Investors should buy this reasonably valued stock with so many catalysts on the horizon.
The Bottom Line on DIS Stock
Avengers: Endgame may be the end game for the Avengers series. But it’s far from the end game for Disney stock. Instead, it’s the first in a series of 2019 catalysts which should provide a lift to DIS stock, meaning now isn’t the time to turn bearish on DIS. Disney stock should remain on a solid uptrend for the rest of 2019.
As of this writing, Luke Lango was long DIS.
