One of the largest media conglomerates in the world had to weather the pandemic storm but unleashed a powerful weapon and is available at a discount.
Aug. 13, 2020
The Walt Disney Company (NYSE: DIS) was originally founded as a cartoon studio in 1923 by brothers Walt and Roy Disney. Today, it’s a media supergiant with properties like 20th Century Fox, Lucasfilm, Marvel, and Pixar under its umbrella, not to mention its global collection of theme parks, high-end residence communities, and cruise line. The pandemic forced its parks and cruises closed and all-in-all the company had to realize nearly a $5 billion loss in the last quarter.
Disney’s Secret Weapon
Disney had one saving grace with Disney+, which was launched in November of last year and has been on fire ever since, recently surpassing 60 million subscribers. The service is an unqualified success offering not only original Disney films and cartoons but also nearly the entire catalog of its properties, which includes 70% of the highest-grossing films of the last decade. The streamer also offers original programming, like the highly popular ‘Mandalorian’ series, and is expected to invest $1 billion this year for further offerings.
Disney’s ‘Hamilton’ was the most popular program across all streaming platforms in July, including Netflix (NASDAQ: NFLX), which has three times as many subscribers, demonstrating yet again the company’s powerful portfolio of popular programming. The company also owns Hulu, which has over 35 million subscribers and offers Disney additional revenue from advertisements. Moreover, it owns ESPN+ which has over 7.5 million subscribers, the majority of which joined during the outbreak.
Disney Still Has More Tricks Up Its Sleeve
As to the pandemic, Disney recently announced that the highly anticipated ‘Mulan’ will be released on Disney+ for an additional $30 and in theaters where Disney+ is not yet available; that includes China, where the film is expected to rake in huge numbers. In order to recoup all budgetary and marketing expenses for the film, the company will need 14% of its subscribers to purchase it, which I feel will not be a problem as early buzz is calling it the best Disney live-action remake ever and it’s the first big blockbuster to be released since the outbreak. And although Disney says this is a pandemic-related one-off, if it is successful, the company also has two additional highly anticipated future blockbusters in ‘The Black Widow’ and ‘Jungle Cruise.’
Disney spends way less on original content than the other OTT providers for one reason: it has an enviable catalog of extremely popular titles and that’s the reason why the streamer has reached its 2024 subscriber goals this year already. One analyst at Forbes feels that the company’s streaming service can be a $30 billion revenue generator by 2025. That’s just one part of the behemoth’s portfolio of properties.
Park Reopenings Offer Hope
In July, Disney reopened its popular theme parks in Florida and although the state has seen a tremendous spike in infection, people still attended, claiming that the experience is different and not completely dulled. Disney’s theme parks are the company’s biggest source of revenue and it was an important first step to re-open. Once scientists find a vaccine for the COVID-19 pathogen, business should return in earnest to the parks and cruises and Disney will be an unstoppable force with the added bonus of having one of the most popular streaming services in the world.
And here’s the kicker with Disney+: it has yet to expand into global territories like China, where Disney already has a foothold with two theme parks (co-owned by the Chinese government); this market entry, its family-themed programming, and existing partnership will probably help the highly-restrictive Chinese government approve the service in its country.
The company has seen its revenue grow over 82% in the last decade, reaching $69.5 billion last year and is $19 billion shy of matching that number this fiscal year. As for its stock price, Disney took a hit during the selloff earlier in the year but is up over 53% from its low at $131.70, roughly $22 shy of its 52-week high, as of August 12. Analysts are predicting a price-target of nearly $174 by 2025 so long term, I feel that you’d be safe to invest in the House of Mouse.
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