As the Walt Disney Company (NYSE: DIS) approaches its record high of $81.59 per share, the company has many investors wondering how much higher the stock will go. In order to understand why the company’s stock price continues to surge, investors need to look at both the original cornerstones of Disney, its animated films, and its theme parks.
Let’s start with an analysis of Disney’s original claim to fame, animated films. It’s fair to assume that every investor is familiar with at least one of Disney’s animated films. Starting with Snow White and the Seven Dwarfs, which was released in 1937, Disney Studios has released well over 100 animated feature films. Even more remarkable than the quantity of its releases is Disney’s quality of recent films, the latter of which has heavily contributed to Disney’s box office success. Furthermore, Disney’s acquisition of Pixar Studios has proved extremely lucrative.
Since the release of Disney Pixar’s first film “Toy Story” in 1995, the partnership has produced fourteen animated films, which have grossed over $8,000,000,000 in box offices worldwide. Pixar Studios has earned 27 Academy Awards, seven Golden Globe Awards, and eleven Grammy Awards. When the Walt Disney Company purchased Pixar Studios for $7.4 billion in 2006, in an acquisition that famously placed Steve Jobs on the board of Disney, the company assured that it would not allow its most important film asset to work with another studio. In that year alone, Disney’s stock price rose 20%. Furthermore, since 2006, the Walt Disney Company’s total assets have grown from $60 billion to over $81 billion; and with a production cycle of 1.5 movies per year (one new feature film a year and a sequel every other year), investors can expect further increases in Disney’s revenue.
Interestingly, individuals familiar with the dynamics of Disney’s animated film division have noted a large amount of competition between the separate Walt Disney Animation Studios and Pixar Studios. Between 1995 and 2010, Pixar Studios was vastly more successful than Walt Disney Animation Studios and was responsible for a majority of Disney’s animated film revenue. However, the trio of the films “Tangled,” “WreckIt Ralph,” and “Frozen,” released in 2010, 2012, and 2013 respectively, have grossed over $2 billion worldwide and have seemingly revived a studio that has not seen significant success since its 2002 release, “Lilo & Stitch.” “Frozen” has grossed over $900 million worldwide alone. This competition is a driving mechanism behind the remarkably high standard of quality for all animated films released under the Disney name. The company as a whole will continue to see success in this division, as competition will continue due to future releases: “Big Hero 6” by Disney Studios, in the fall of 2014, and Pixar’s “Inside Out,” in early 2015.
The success of Disney’s animated films is also being reflected by its theme parks. Thanks to its animated films, Disney is able to charge premium ticket prices for admission into its theme parks, while simultaneously increasing their attendance. Furthermore, per capita guest spending for Disney theme park guests has increased by 6% in 2013. This can be attributed to a rise in consumer spending that has continued since 2010.
The Walt Disney Company is currently in the news for raising the price of a day pass to the Magic Kingdom in Orlando, Florida $4 to $99. Yet despite the price hikes, investors can expect both the per capita guest spending, and admissions, to continue to grow; thus leading the way for further revenue increases in the Walt Disney Company’s theme park division.
Together, the animated film division and the theme park division of the Walt Disney Company provide support for the company’s increasing stock price. However, these divisions account for only two of the five total parts of the company. Therefore, investors should be aware that this article does not provide a complete price analysis of the stock, but rather a focused analysis based on the original divisions of the Walt Disney Company.