The Walt Disney Company (DIS, Financial) has chalked out an ambitious three year plan. After the announcement of the set plan, the stock of the entertainment giant saw great momentum in the following trading session. The company is riding high on the positive market vibes. Let us take a closer look at what’s going on with Disney that’s propelling the company to stardom.
Upcoming chart busters
Last week, Disney announced a sequel to its mega hit Frozen. The animated movie has made $1.2 billion. Star Wars: Episode VIII is slated to be released on May 26, 2017. Disney is also estimating a gross profit of $60 million out of its $95 million budget for the soon to release movie Cinderalla. With the release of this classic fairy tale movie, Disney is all set to release two Pixar films this year and 11 Marvel films in the upcoming two to three years, starting with ‘Avengers: Age of Ultron’, due for release on the May 1, this year. Disney is expecting the movie to be a massive hit since the teaser trailer has seen over 35 million views within 24 hours of its release.
Theme park category expansion
Also when it comes to the Disneyland theme parks, the company is in an expansion mode. Although the company has refused to divulge the details on the number of new theme parks, locations or the nature of expansion, but such a plan is most likely to feature in the Marvel super heroes or the Star Wars characters. Disney acquired Marvel Entertainment Inc. and Lucas film in 2009 and 2012, respectively. Disney’s massive park in Shanghai is set to be launched in 2016. This is one of its most ambitious international projects so far. It is also planning to double the size of Disneyland Hong Kong during the phase 2. The Hong Kong Park had over 60 million visitors in 2014 which is up by 12% y-o-y. The company might also rethink on renaming its Hollywood themed park in Orlando.
Right marketing mix
Disney has also got it right when it comes to international expansion with respect to Disney content and creation of products specifically for overseas markets like India. Under the leadership of Disney’s CEO, huge emphasis is being laid on technology and experimentation. The Company has innovated and evolved in every aspect, whether it is digital distribution at ESPN or launching ‘MyMagic +’ wrist bands at the parks to facilitate shorter waits and cashless payments.
Stock performance
Since 2005, when Bob Iger took over as the CEO of Disney, the shares have surged three times, backed by his brand focused strategy. Disney theme parks and resorts segment rose by 20% y-o-y in the fiscal year 2014. This is the second largest revenue segment for Disney and acts as a spring board for the current and sequel of the hit movies produced by it. The current EPS for Walt Disney stands at $4.50 a share. The dividend yield figure stands at 1.10%. The average EPS expectation for the current quarter stands at $1.09 a share which is slightly lower than $1.11 a share registered in the corresponding quarter last year. The Street is expecting Disney to churn out positive earnings growth of 4.5% y-o-y, which would amount to $12 billion in revenue for this quarter. The annual revenues are expected to exceed $52 billion. After the string of ambitious announcements made by the company in its annual meeting last week, the price of the stock has taken a positive trend and has risen by 4.2%.
Our take
Disney has been churning out record numbers in its movie and non-movie segments. The recent announcements have broadened the scope of these numbers multi-fold, indicating a stronger stock, higher prices and better yield. A strong ‘buy’ and ‘hold’ stock guidance is hence being recommended.
