Lots of Upside Left for Disney Stock
Walt Disney Co (NYSE:DIS) stock hasn’t exactly lit up investors’ portfolios this year. DIS stock is basically unchanged for the year, regardless of the major success of Star Wars. But that could be because the anticipated record-breaking success of the movie was already priced into Disney stock leading up to its release in December. Nevertheless, there’s still a lot to like about Disney. Here are a few catalysts that could send DIS stock upward this year.
Disney is one of the most valuable brands in the world. Forbes magazine ranks the company the 11th most valuable brand globally, with a brand value of $34.6 billion. (Source: “The World’s Most Valuable Brands,” Forbes, last accessed April 27, 2016.)
Not only is the company one of the most recognizable names in the world, Disney also owns incredibly valuable brands, such as Pixar, ESPN, Marvel, ABC, and Lucasfilm, among many others. It also has the intellectual rights to some of the most recognized characters in the world, ranging from Mickey Mouse to Yoda to Spider-Man.
Star Wars alone is estimated to be worth $42.0 billion. To put this number into perspective, the Harry Potter franchise, which was and still is a massive hit, is worth about $25.0 billion. (Source: “Star Wars Franchise Worth More Than Harry Potter and James Bond, Combined,” Fortune, December 24, 2016.)
Of course, being the owner of so many brand names is going to bring in massive revenue. Thanks in large part to Star Wars, Disney scored record earnings in its latest quarter. Last quarter was the 10th consecutive quarter that delivered double-digit earnings growth for the company.
Disney stock should continue to grow from the success of the many valuable brands Disney owns.
Shanghai Theme Park
Shanghai Disneyland is set to open in June this year and it should be a major boost to the company’s theme park business and Disney stock. Disney’s theme park business is its second-largest operating segment, accounting for almost a third of total revenue. (Source: “The Walt Disney Company Reports Record Quarterly Earnings For The First Quarter of Fiscal 2016,” Walt Disney Co, February 9, 2016.)
The new park is going to be absolutely enormous, which is fitting since it’s in the world’s most populace country. Disney says the park will be almost 1,000 acres, which is about three times the size of the Hong Kong theme park.
The $5.5-billion project is expected to draw about 25 million visitors annually. That would make it the world’s most visited theme park, putting it ahead of the current world leader, Disney’s Magic Kingdom, which has about 20 million visitors annually.
China’s middle class is still growing rapidly and that should help fuel future sales at the new theme park.
ESPN is the biggest sports network in the world and the second most valuable sports brand globally, according to Forbes. (Source: “The Forbes Fab 40: The World’s Most Valuable Sports Brands in 2015,” Forbes, October 22, 2015.)
The network is part of Disney’s Media Networks segment, which is the largest revenue source for the company, accounting for about 43%. Most of that revenue comes from ESPN, which shows you what a moneymaker the network is.
ESPN has lost about seven million subscribers in the past two years, though, as consumers continue to cut the cord. But to help counter subscriber decline, ESPN launched its online streaming app on various devices, including “Roku,” “Sling TV,” “PlayStation,” “Xbox,” and “Apple TV,” among many others.
ESPN’s online steaming app will be the next growth phase for the network. The potential is huge, as the market is projected to grow from 58 million global online sports subscribers in 2012 to about 145 million by 2017. (Source: “eSports Marketing: 15 facts and numbers you should know about,” eSports Marketing Blog, February 18, 2015.)
As Disney moves to make streaming sports online seamless for customers, subscriber revenue should start picking up in the coming months and years.
Disney stock is relatively cheap at 16.8 times its forward earnings. With Disney owning the world’s most valuable brands and characters, the opening of the Shanghai Theme Park, and growth in ESPN online subscribers, it might be time for investors to take a look at DIS stock.