This Could Send DIS Shares Soaring
Star Wars Episode VII: The Force Awakens is undoubtedly the most anticipated movie of 2015. The question now is: what will the new Star Wars movie do to The Walt Disney Company (NYSE:DIS) stock?
The new movie, Star Wars Episode VII: The Force Awakens, achieved a new world record even before it was released. On June 16, 2015, Guinness World Records announced that the second teaser trailer for the film set a new world record for the most viewed movie trailer on YouTube in 24 hours. Note that Star Wars also holds a Guinness World Records title for the most successful film merchandising franchise. (Source: “Star Wars: The Force Awakens Second Trailer Sets YouTube World Record,” Guinness World Records web site, June 16, 2015.)
With unprecedented enthusiasm, the new movie is on its way to set records on its opening weekend. According to Boxoffice.com, ticket presales have been tremendous—between $50.0 million to $60.0 million for the opening weekend alone. The web site predicts that The Force Awakens will bring in $229 million during its opening weekend, meaning the movie would top the $208.8-million debut of Jurassic World earlier this year to set a new all-time opening weekend record. (Source: “Weekend Forecast: ‘Star Wars: The Force Awakens,’ ‘Alvin and the Chipmunks: The Road Chip’ & ‘Sisters’,” Boxoffice.com, December 16, 2015.)
Other than Star Wars fans, Wall Street is also excited about the new movie. Goldman Sachs Group Inc. (NYSE:GS) recently raised its box office estimates for the new movie from $1.5 billion to $2.0 billion. The new estimate includes $750 million from domestic box office sales and $1.2 billion from international sales. This would put Star Wars Episode VII: The Force Awakens in third for the highest-grossing movie of all time, behind only Titanic and Avatar. (Source: “Goldman Digs into ‘Star Wars’ Box Office data, and It’s a Fun Ride,” Yahoo! Finance, December 17, 2015.)
No doubt, Star Wars Episode VII: The Force Awakens is going to make some big money for Disney. Of course, the movie was not cheap to make, with a total production budget of about $200 million. However, the film should be able to recoup that in days, which is good news for owners of DIS stock.
Mind you, Disney is not finishing up its run of George Lucas’ series with just one film. In addition to The Force Awakens, Disney is scheduled to produce at least two more Star Wars films and at least two spin-offs in the next four years.
Note that Disney also owns Marvel and Pixar. A sequel to Marvel’s Captain America is coming up, while Pixar has sequels to Finding Nemo and Toy Story to soon be released.
Increased popularity of Disney’s movie series could also bring in more revenue from merchandise sales. According to analyst Tim Nollen from Macquarie Capital, the release of the new Star Wars movie could generate $5.0 billion in consumer merchandise sales in the first year. (Source: “Macquarie Remains Bullish On Disney, Notes Three Near-Term Catalysts,” Yahoo! Finance, December 17, 2015.)
In addition, Disney is getting ready to open its theme park in Shanghai, China. Nollen estimates that the new park could add $300 million to Disney’s revenue in 2016 and break even in less than two years. After that, the new park could add a “small but rising” percentage to DIS stock’s earnings per share going forward.
Therefore, while enjoying the new film, don’t forget to take a look at Disney stock as well.