Walt Disney (Dec. 2015)

Walt Disney (Dec. 2015), Lucasfilm payoff !

Over the past two decades, total U.S. box office gross sales have ticked steadily higher, growing from USD 4.8 billion in 1991 to USD 10.92 billion in 2013: (Top Grossing Movie Distributors 1995-2015; Walt Disney)

The second top grossing movie distributor of the past two decades, The Walt Disney Company has had plenty of tremendous successes in the past (The Lion King and Frozen just to name two).

A recent series of acquisitions has beefed up its portfolio of valuable assets:
In 2006, Disney bought animation standout Pixar for $7.6 billion...
In 2009, it purchased Marvel Entertainment for $4.24 billion...
Then, in 2012, it acquired Lucasfilm for $4.06 billion ("Star Wars" !!)

With Marvel and Lucasfilm, Disney has two very profitable franchises to draw from. Lucasfilm gives the company Star Wars, one of the most beloved movie franchises of all time.

And Marvel gives Disney access to a sea of comic book properties, save for Spider-Man, Fantastic Four and X-Men.

The great thing about comic book movies is they are built-in franchises. If a film is well received, Disney can just crank out another... and another... and so on. Not to mention the merchandising...

Focusing on Star Wars, after the current 2015 release four more films will roll out over the next four years. Add up all of those box-office receipts, plus merchandise, video games, theme park tie-ins and DVD sales, and the revenue tied to "Star Wars" could top $25 billion over the next five years, based on analyst estimates.

How much of that Disney will pocket is hard to calculate. Disney has not disclosed its own revenue projections for the films, nor has it said how it divides revenue with retailers, exhibitors, toy makers, video game developers and other partners.


"Star Wars" already is a dominant force in the retail world, filling store shelves with action figures, backpacks, video games and more merchandise. Analysts predict merchandise sales tied to "The Force Awakens" will range from $3 billion to $5 billion in the first year. And after five years, the total could be in the $11-billion to $20-billion range, experts say.

Disney and major "Star Wars" licensee Hasbro declined to disclose sales figures for the new "Star Wars" merchandise.

The retail success of Disney's "Frozen," the top-grossing animated picture of all time, could illustrate how "Star Wars" will perform in the company's hands. Two years after its release in theaters, "Frozen" is still paying dividends for Disney's consumer product arm: The film's merchandise sales were credited with helping boost the division's operating income 10% to $416 million in the quarter that ended 3rd Oct. 2015.

The addition of "Star Wars" attractions to Disneyland and Hollywood Studios at Walt Disney World Resort in Orlando, Florida, could drive a new generation of visitors to those properties. Disney has not said when the attraction will open, although the projects are scheduled to break ground next year.

Segmentation Split

Disney earns most of its revenues from its Media Networks segment (45%); then Parks and Resorts (31%); followed by Studio Entertainment (14%); Consumer Products (8%); and Interactive (2%). The Interactive segment is the youngest, but also the fastest growing.

But while most of Disney’s segments are susceptible to a macroeconomic downturn, the company has tried to spread its risks by making long-lasting investments in all categories. Disney recently reached the tail-end of a substantial investment cycle it initiated in the recessionary period, and the benefits accruing from its investments will trickle in steadily in the years to come.


Investors should not need to overreact/worry about the threat posed by online competitors since right now Disney’s most lucrative premium cable network, ESPN, is yet to be matched by a competing service. ESPN has a stronghold on American sports broadcasting – something which new media companies will find very hard to challenge. It generates close to $9 billion in revenues annually, and Disney’s 80% ownership of the network has boosted the latter’s bottomline growth. Furthermore, the kind of pricing power Disney has with ESPN is also unmatched. At close to $5.5 a month per subscriber, ESPN commands the highest rates in the nation for any channel.


In my opinion (Ralph Gollner) it is now just the time to recheck, where the risks in the valuation of Disney-shares lie; Especially now, since the stock-performance (excl. Dividend-payments) in the past 6 months has been negative (minus 3.97%). The company is currently (28th Dec. 2015) valued at a Price-Sales-Multiple of ca. 3.4 (Price per share: 107.25). The average PS-ratio for DIS-shares over the last 5 years was ca. 2.3 (according to Therefore there would be a theoretic floor at ca. 72 USD per share if one would apply such a multiple for Risk-assessment-purposes (implying a downside-risk of ca. 29% to 35% from current levels). On the other hand - as always - if herd behavior kicks in >> "the sky may be the limit".

Disclaimer: Ralph Gollner hereby discloses that he directly ownes some of the securities that are the subject of the commentary, analysis above (as per 28th Dec. 2015).