Disney Stock: This Could Be Huge for Walt Disney Co
Everyone knows how much money the Star Wars franchise has been making for Walt Disney Co (NYSE:DIS). Chances are the value of the franchise has already been priced into Disney stock, so I’m not going to talk about it. Instead, I will focus on the less talked about items that could become huge catalysts for Disney stock.
A Big Deal for Disney Stock
First up is the soon-to-open Shanghai Disney Resort, which would be the first Disney theme park in Mainland China.
To give you an idea of how big the theme park is going to be, here’s a number: 963 acres. That’s how much land the Shanghai Disney Resort is expected to occupy, which also makes the resort about three times the size of Hong Kong Disneyland Park.
In case you haven’t noticed, theme parks have been a major revenue source for Disney. In the company’s fiscal 2015, parks and resorts generated $16.1 billion in revenue; this makes the segment Disney’s second largest revenue source, only behind media networks. (Source: “The Walt Disney Company Reports Fourth Quarter and Full Year Earnings for Fiscal 2015,” Walt Disney Co, last accessed January 14, 2016.) Also, profits from Disney’s theme parks have been growing at an impressive rate. In fiscal 2015, operating income from parks and resorts surged 14% to $3.0 billion.
Building the first Disney theme park in Mainland China is no easy feat, taking almost a decade in planning and over five years to build. According to Disney, the $5.5 billion project is the largest foreign investment project in Shanghai and one of the largest foreign investments in the history of China. (Source: “Opening Date Set for Shanghai Disney Resort, Disney’s Newest World-Class Destination,” Walt Disney Co, January 12, 2016.)
The big question now: when will it open?
Well, Disney has set an opening date for Shanghai Disney Resort: June 16, 2016. This means in about three months, 1.4 billion people in China will be able to experience a world-class Disney resort without leaving the mainland.
Of course, what investors really care about is how much boost this would give to Disney’s financials. Judging by what the theme park is comprised of, the company could be making some serious money.
You see, upon opening, the resort will include a world-class theme park with six themed lands, two theme hotels, and a shopping, dining and entertainment district. Given Shanghai’s convenient location, China’s giant population and their enthusiasm for Disney’s creations, the resort could be a giant cash machine for the company.
And let’s not forget that Disney’s cinematic business is still going strong. Even when you exclude the Star Wars franchise, the company still has quite a few blockbusters coming up. Disney owns Pixar, which is about to release sequels to Finding Nemo and Toy Story. Moreover, the company also owns Marvel Entertainment, which has sequels to Captain America, The Avengers, and Guardians of the Galaxy in the works.
The Bottom Line on Disney Stock
Despite the company’s bright outlook, Disney stock hasn’t been doing that well; in the past three months, the stock is down 14.7%. Knowing what the company is capable of doing next, it would be interesting to see whether DIS stock can become attractive again.
