The Walt Disney Company DIS has been riding high on anticipation of its new Avengers movie. The company was upgraded to ‘Buy’ from ‘Hold’ by Guggenheim Partners with a target price of $127 as Avengers: Age of Ultron gears for release in North America on May 1.
As per Guggenheim Partners, Disney’s performance in fiscal 2015 will continue to get a boost from the enviable movie slate that includes the year’s two most anticipated movies, Avengers 2 and Star Wars: The Force Awakens, both already labeled as billion dollar movies. Apart from huge box office collections, these movies will result in good business for Consumer Products as well as the Parks and Resorts divisions in the future.
Notably, Avengers: Age of Ultron has already grossed over $201 million in its first week in at least 44 overseas markets. Moreover, it opened almost at the no. 1 slot in every territory. The movie will release in North America on May 1 where it is expected to zoom past the $207 million record set by its predecessor, The Avengers, in 2012.
The Avengers not only had a fantastic opening but with a worldwide box office tally of over $1.5 billion, it is the third highest grossing film of all time behind Twenty-First Century Fox, Inc.’s FOXA Avatar and Titanic.
Further, the movie opens in China and Japan, two other very big markets for Hollywood, on May 12 and Jul 4, respectively.
Given the extensive buzz surrounding Avengers and Disney’s unparalleled marketing abilities, it has been labeled a billion dollar movie. Going by initial numbers and the more or less positive reviews, it should easily breach the billion dollar mark. Recently, Comcast Corporation’s CMCSA Furious 7 became the third movie to gross $1 billion in overseas box office collections.
Add to it, Star Wars: The Force Awakens, the first movie of the incredibly popular franchise in a decade. Disney is leaving no stone unturned to generate huge publicity in order to ensure a record opening for Star Wars when it releases on Dec 18, 2015.
Moreover, Frozen became the highest grossing animated movie of all time with over $1.2 billion in box office receipts, and merchandise associated with it also dominated the top selling toys list over the last holiday season. Avengers and Star Wars has the potential to set the consumer products division on fire.
To further capitalize on this success, the company is looking to add Marvel and Star Wars themed attractions to its parks, which will definitely boost footfall.
While Guggenheim continues to maintain a cautious stance on the media sector, it believes that Disney will continue to top estimates in the coming quarters given the abovementioned factors. As a result, investors will assign higher valuation premium to the company's branded assets going forward.
Even analysts at Citigroup Inc. C were constructive on the stock, raising the price target from $110 to $125 per share. Shares of Disney closed at $110.16 up 0.6% in yesterday’s trading.
Zacks Research Pvt Limited has already marked Disney as a Zacks Rank #2 (Buy) stock given its solid fundamentals and future growth prospects. For full information please read our article: Is it a Good Time to Buy Disney (DIS) Ahead of Star Wars?
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