Walt Disney Co: This Is Why DIS Stock Is Rising

disney stockMay the Force Be With DIS Stock

A little-known franchise by the name of Star Wars just had another film released by Walt Disney Co (NYSE:DIS) and, to absolutely no one’s surprise, the movie is making money hand over fist. Raking in $155.0 million in its opening weekend, Rogue One: A Star Wars Story exceeded the $130.0 million-plus expectations for opening weekend and helped propel DIS stock by two percent on Monday.

Unless you’ve been living under a rock, you’ve probably been peppered by trailers, critics, and even just stray chatter about the next entry in the Star Wars universe. Though I’ve personally never asked the question, “How did the rebels get the plan for the Death Star?” apparently thousands of moviegoers have, as evidenced by the strong performance at the box office. And, of course, what’s good for Star Wars is good for DIS stock. Disney acquired Lucasfilms in 2012 for $4.0 billion. (Source: “Disney’s Rogue One Garners $155M in Opening Weekend,” Yahoo! News, December 19, 2016.)

But, despite beating domestic expectations, Rogue One hasn’t performed well overseas. It released in 70% of the international market garnering about $135.5 million, which is quite a bit below the analysts’ projected $300.0 million.

But there’s still a (new?) hope: Japan is the only major Asian market where the movie has been running in theaters, while it will hit the big screens in South Korea and China on December 28 and January 6, respectively.

DIS stock has become the juggernaut in theaters. Between its combined control of Disney hits, the entire Marvel cinematic universe and the Star Wars franchise, you usually won’t have to look far to find a Disney film in the top box office earners.

What’s perhaps most fascinating is that while DIS stock seems to have the film industry firmly in its corner, this hasn’t translated to exceptional returns. Shares are up only about half a percent since the beginning of 2016, which is considerably less than a number of other large media corporations.

Part of the problem is that some of the value of DIS stock is being lost to consumers cutting the cable TV cord, leading to a decline in ESPN revenue, which is owned by Disney.

But the good news is that the short interest in DIS stock has been steadily dropping. Since July, the short position has fallen by a massive 54% by the end of November. This appears to indicate that the market in general is bullish on Disney. (Source: “Disney Stock: Why The Shorts Are Fleeing Walt Disney Co (DIS) Stock,” Amigobulls, December 19, 2016.)