Summary
- In October of 2018, I predicted that Disney would crush its own 2016 global box office record in 2019.
- Avengers, Captain Marvel, Toy Story, Aladdin, and now Lion King have propelled Disney towards new record highs.
- I still think my $9b+ target is likely, with $10b+ not out of the question should Frozen 2 and Star Wars both surprise to the upside.
- This idea was discussed in more depth with members of my private investing community, The Dividend Growth Club . Start your free trial today »
Any long-term follower of mine knows that I am extremely bullish on The Walt Disney Company (DIS). To me, Disney is the ultimate long-term S.W.A.N. (sleep well at night) stock. DIS has been one of my largest holdings for years. Right now, it sits at #2 in my portfolio, behind Apple (AAPL) with a 6.95% weighting. This overweight exposure (I consider a 2% weighting to be a “full position”) shows my bullish conviction.
For a while there, my overweight position was looking like a bit of a mistake. Disney was a laggard from 2015-early 2019. The share price remained range-bound due to fears of the cord-cutting phenomena. However, the underlying fundamentals continued to grow and once sentiment changed when Disney announced its own streaming plans, the stock was off like a rocket. Disney is up nearly 30% year-to-date. And, while much of this move is due to multiple expansion, I think it’s important to focus on the company’s record-breaking content slate because I continue to believe that over the long run, content will remain king in the media business and Disney continues to prove, time and again, that it is the global leader in entertainment.
Before the recent rally began, towards the end of 2018, I wrote that 2019 would be a record-breaking year for Disney’s film studio. Not only did I think that the company would beat its 2016 box office record of $7.6b in sales, but I thought the company’s 2019 film slate had the potential to blow past $9b.
Thus far, the year has gotten off to a good start. Avengers: Endgame has made most of the headlines. This past weekend that movie passed Avatar to become the highest-grossing film at the box offices of all-time. Avengers has produced $2.79b in global sales. It’s crazy to think about a single movie producing those types of revenues when one considers that Disney bought Marvel for $4b in 2009, which will turn out to be one of the finest successes of Bob Iger’s time at the helm as CEO. Captain Marvel was also a big hit, breaking past the $1b worldwide sales threshold and adding yet another appealing character to Disney’s Marvel universe. And, the superhero hits aren’t likely to stop anytime soon. This weekend at San Diego Comic Con, Disney management announced the plans for phase 4 of the Marvel Cinematic Universe’s expansion, which includes a wide variety of movies and TV shows spanning out to 2021.
Admittedly, Toy Story 4 and Aladdin underperformed my expectations. I thought both had the potential to be $1b+ films as well. Toy Story 3’s global box office totaled just over $1b and I thought that the new addition to the franchise had the potential to build upon that momentum. But, it appears that the 2010 edition will end up winning out because Toy Story 4’s global sales total just $861m right now (granted, $861m is nothing to scoff at; Toy Story 4 remains one of the highest-grossing animated films of all-time).
Maybe I let personal bias get in the way, but I thought the live-action version of Aladdin had major $1b+ potential as well. I’m a big fan of Disney remaking the animated classics in live action and I assumed that I wasn’t alone. I’m not talking of Avengers potential, but I thought the millennials who grew up during the heyday of Disney’s animation renaissance would flock to the theaters with their kids to introduce them to one of their favorite childhood stories.
