Disney’s Box Office Success Falls Short Of Boosting Valuation

The last year at the box office has been one of the best in the company’s history, yet shares of Walt Disney Co. (DIS:NYSE) still remain well below 52-week highs as investors once again sound the warning bell on falling ESPN subscriptions. However, irrespective of the ongoing evolution of the media landscape, smart decision-making combined with growth through acquisition of highly monetizable franchises has put the company in an enviable position going forward. Hot properties such as Star Wars, Marvel, and Indiana Jones combined with the focus on launching new theme parks will undoubtedly translate to substantial shareholder upside over the medium-term despite near-term challenges facing Disney’s management. A fair valuation combined with a focus on keeping competitive in an increasingly web dominated space should help keep the company on track and outperforming analyst expectations over the near-term.

Box Office Blockbusters

Hot on the heels of the acquisitions of several highly acclaimed franchises, Disney has continued to show its prowess following the successful launch of its first episode of Stars Wars. Aside from being one of the highest grossing films of all time, this is the first title of several others to follow over the coming years and is the tip of the iceberg when it comes to monetizing the brand.Aside from ticket sales, the focus on licensing fees for consumer focused products will help continue to feed the top and bottom lines over time.Aside from Star Wars, other recent studio film deliveries including the Jungle Book and Zootopia have experienced sensational results, putting Disney on track to shatter all its previous box office revenue records during 2016.Thanks to a strong record of diversification, Disney will be able to build on this momentum over time.

Although the film side of the business is important in helping to drive top and bottom line results, the new found increased emphasis on merchandising will help herald a new era of growth for the company. Additionally, a new theme park being built in China is expected to be one of the best performing properties in Disney’s portfolio in the coming years. Thanks to a middle class that is only expected to grow over time, there are several notable figures, such as Starbucks’ CEO Howard Shultz, anticipating that the new Shanghai Disneyland will be amongst the biggest tourist attractions across Asia. The successful implementation of the acquisition model and increased vertical development of certain high profile franchises means that Disney has effectively positioned itself to grow over the next 5-10 years, building on the longer-term expansionary focus of management.