If you had to ask analysts about the main catalyst for Disney (NYSE:DIS) going forward is, there’s a good chance that they’ll say streaming. And that’s true to some extent. The launch of Disney+ bundled with Hulu and ESPN+ is going to make Disney stock investors a fortune over the long haul.
But the one thing that is great about Disney is that it has plenty of levers to pull when it comes to generating revenue, cash flows and profits for shareholders. Disney’s studio operations are killing it.
Ticket sales from current film productions continue to hit records with several blockbusters still in the theaters. Meanwhile, DIS recently unveiled its next round of hits under its Marvel imprint. The reality is, Disney’s film ambitions have a lot of long-term potential. Potential that will cascade over to its streaming and theme parks.
For investors in DIS stock, movies matter a lot.
Disney Is Simply Making Blockbusters
Truth be told, the executives at Disney have made some really amazing decisions when it comes to adding/buying studios. Pixar, Marvel, Lucasfilm and now Fox have all continued to bear serious fruit for DIS over the last few years and recently investors were reminded of just how powerful these studio operations are. This summer, Disney has simply had blockbuster after blockbuster.
The latest film in the Toy Story franchise was a success, while its live-action versions of both Aladdin and the Lion King set open weekend records when released.
Perhaps the biggest win for Disney this summer was Avengers: Endgame. The film had already broken tons of records for sales, but over the last weekend, Endgame managed to become the highest-grossing film of all time. All in all, the movie has pulled in more than $2.79 billion worldwide to overtake the previous record held by Avatar.
The irony is that through its buyout of Fox, Disney now owns the rights to Avatar.
All in all, data from Box Office Mojo shows that DIS now has five of the top six biggest openings of 2019.
These hits have made Disney a tremendous amount of cash. The best part is that the studio operations have the potential to keep the gains coming. Rounding out this year, sequels to Disney’s successful Maleficent and animated Frozen franchise will be released. During the holiday season, fans will get the final film in the original Star Wars universe. Each of these has the potential to be major moneymakers for the studio, and this doesn’t even include the potential for sleeper hit from its now acquired Fox studio assets.
Pushing out further, Disney stock has a few more billion-dollar films in its arsenal. At the San Diego Comic-Con, Marvel announced its movie and television schedule for the next few years. Here again, the potential is huge.
The original Marvel Cinematic Universe was 23 movies long and generated more than $22 billion in worldwide ticket sales. With reboots of old pre-Disney Marvel films, several sequels as well as plenty of possibilities for new multi-film franchises, Disney has the goods to keep the revenues going.
And when looking at Disney’s full stock of films– not just Marvel- the possibilities are great.
Very Important for Disney Stock
So, why does its studio assets matter for Disney stock most of all? It all comes down to monetization. Absolutely no one monetizes intellectual property quite like Disney. DIS can take a film, push it into theme park attractions, toys, t-shirts, books, you name it. Characters matter and the bigger the film, the more Disney can monetize those assets.
This includes adding it to its streaming assets. If a film is a hit, people will be prepared to sign up for Disney+ in order to watch it. So, those upcoming Marvel and Star War releases are critical to its bottom line. Even more so, now that the firm has announced several Disney+ only shows featuring characters from these respective universes.
Just how critical?
Morgan Stanley now estimates that Disney stock could see double earnings over the next four years- going from $6.50 per share in 2020 to roughly $12 per share by 2024.
That all comes down to the strength of its box office wins and the ability to push these assets in tangential products. “Consumer Products & Interactive Media” -which is DIS’s licensing arm- managed to pull in $4.6 billion in sales last year, but it happens to be one of its most profitable divisions. A hit movie simply translates into bigger sales/profits for Disney stock.
The Slate Is Good for Disney Stock
In the end, with Disney’s studio mojo continuing, investors will be pleased. Already, the firm continues to see record blockbuster performances from its films and the current spate of new movies over the next few years will certainly produce many winners. That’s key for DIS’s bottom line going forward.
The ability to translate those movies into wins in other areas is what makes Disney stock so powerful for portfolios. If Disney can keep its box office mojo going, the stock is a major buy.
Disclosure: At the time of writing, Aaron Levitt did not have a position in any stock mentioned.
