Why DIS Stock Could Go Rogue This Week
The release of Rogue One: A Star Wars Story this week is anything but normal for Walt Disney Co (NYSE:DIS). Although you may be tempted to roll your eyes at another Hollywood spin-off, this movie could send Disney stock (DIS stock) to record highs.
Why, you ask? Because Rogue One is different from any old Star Wars movie. Instead of the usual recipe—Skywalkers, lightsabers, and Death Stars—there is an entirely independent plot set inside the same “universe.” There are new characters, new drama, and a new directorial style.
If this movie is a hit, DIS stock will have struck gold. It would mean a huge expansion of Disney’s profit-making ability, and would help pay for the $4.0-billion cost of acquiring the Star Wars franchise in the first place.
Let me explain…
Disney stock has quadrupled with Bob Iger as its chief executive.
Ever since he took the top spot in 2005, DIS stock headed up and to the right. The reason why is no secret. Iger made some big acquisitions over the last decade, including the animation studio Pixar, Marvel Entertainment, and, of course, Lucasfilm Ltd.
Iger’s success rate has been astounding. He has a simple but effective strategy for stretching once-famous franchises into cash cows. Just look what he did with Marvel.
Under his direction, Marvel started acting more like a TV series producer than a film studio. The company continues story arcs over several films and has side characters spin off into their own series, because the overlapping characters and plotlines keep viewers coming back for more.
Moreover, it gives Marvel more content to put out.
Iger has fueled Disney stock for years with this strategy, so he wants to replicate that success with Lucasfilm. Sure, Star Wars: The Force Awakens made a whopping $2.0 billion of revenue. It continued the main story of Star Wars and people loved that. There are even two more installments on the way. But that only gives Disney three blockbusters over a six-year period.
Why stop there, asks Iger?
He realized he could mimic the Marvel strategy to help make Lucasfilm just as much of a cash cow. That’s where Rogue One comes into the picture. It is a semi-related prequel that, if successful, could greenlight an expansion to the Star Wars universe.
Iger is betting big-time on this strategy. Including this film, Disney has three spin-offs planned, thus bringing Lucasfilm’s output to six blockbusters in as many years. There is also a Star Wars theme park being built in Orlando, Florida to squeeze every nickel from the Lucasfilm acquisition.
Based on the trajectory of Marvel, we could also see a bunch of TV shows and video games. It may sound like a soulless cash grab, but hey, that’s exactly why you should be bullish on Disney stock. Bob Iger knows how to stretch a film franchise better than anyone.
The funny thing is that moviegoers love it. The “Marvel Cinematic Universe” (MCU)—as it is called in the industry—is one of the most successful business ideas of the last decade. I would keep a close eye on DIS stock now that Iger is trying to replicate its success with Rogue One.
The upside potential is massive.