Following Disney (NYSE: DIS) and its escapades over the past few years has been at least as exciting as paying money to see one of its blockbuster films. Some of the highlights are new CEOs, old CEOs, complete stops to some of its businesses, skyrocketing streaming, huge losses, and fabulous rebounds.
It's no surprise that you'll hear varying opinions about the company's prospects and whether or not you should buy its stock. There's just so much to unpack when it comes to the world's largest (and perhaps most complex) entertainment company.
CEO Bob Iger's epic return to the top spot signaled confidence on Wall Street because he developed the playbook for Disney's well-oiled money-making machine. The landscape looks a lot different these days, but some things never change, such as James Cameron's stunning ability to create incredible sales-generating films, and Disney's ability to find people like him and churn out new hits from reliable franchises.
That leads to why I think Disney has a strong shot at a great year.
Marvelous Marvel
In a move worthy of an Oscar, Iger directed the acquisition of Marvel Studios in 2009 for $4 billion. Since then, Marvel has been an incredible asset for Disney. It accounts for six of the 20 highest-grossing movies ever, and it generated 21% of all domestic ticket sales in 2020 and 2021. The Marvel Cinematic Universe (MCU) has grossed more than twice the amount of the next-highest franchise, Star Wars -- also owned by Disney.
Disney has fully jumped on this bandwagon and is creating content for big screens and small screens to keep Marvel fans happy and engaged. It has also masterfully designed all of the content to work together, so viewers would need to follow the stories on streaming to understand all of the developments accounted for in the films released in theaters.
In June, then-CEO Bob Chapek explained that "We have seen each new Disney+ original Marvel series attract incremental viewership and new subscribers that hadn't previously engaged with Marvel content on the service." These fans then go on to further engage with the MCU through theater releases and content-based products.
Marvel's first 2023 release, Ant-Man and the Wasp: Quantumania, opened last weekend with $104 million in opening weekend sales, exceeding expectations and becoming the third-highest February opening ever. Marvel has two more films for theater release in 2023, and another seven slated for release through 2026. That's in addition to streaming content and other products.
The other Disney studios aren't too shabby
Disney is much more than Marvel. The top 2022 film, Avatar: The Way of Water, was released by Disney's 20th Century Studios, which it acquired in 2019, also under Iger's magnificent direction.
Consider Disney's 2022 film slate versus its competitors. Here it stacks up against any other studio that had a top-10 film in 2022, which includes Paramount, Universal, and Warner Bros. Discovery.
2022 highest-grossing films by parent company. Data source: IMDB. Chart by author.
And no, 2022 wasn't an exceptional year. OK, Avatar: The Way of Water was an exceptional film, becoming the third highest-grossing film ever in a matter of weeks. But Disney typically outperforms other media companies in ticket sales in any given year.
The first memo Iger sent out in his smashing return to the CEO role centered around giving Disney's creatives more control in the distribution process. More freedom in that process should lead to content being provided in the right medium to make the most money. Ticket sales are a central element in recovering costs for expensive content, and in sending the right films to theaters to add to profitability without cutting into streaming efforts.
A year full of franchises
Disney is releasing seven other films outside of the MCU in 2023. Three are sequels in a franchise (Indiana Jones and the Dial of Destiny, Guardians of the Galaxy Vol. 3, Wish II) and two are based on previous hits (Peter Pan & Wendy, The Little Mermaid). The other two are Pixar's Elemental and Walt Disney Studios' Haunted Mansion. Iger also told investors that it has new sequels in the works for Frozen, Toy Story, and Zootopia.
In other words, the majority of Disney's theater content is almost no-brainer efforts. The creators know audiences love and wait for this content. So far, the movie theater industry hasn't met an untimely demise, as many predicted. It's still recovering, but hit films are drawing in viewers.
Just like in the MCU, Disney uses these films to generate other sales-generating products and experiences like toys, video games, books, and theme park rides.
Disney stock could be a hit this year
Disney is facing mounting pressure from its streaming business. It actually lost subscribers in the fourth quarter, and losses were still staggering. However, investors were pleased with progress in slashing costs and narrowing streaming losses, even though they still came in. Disney doubled down on its commitment to Disney+ becoming profitable by the end of 2024.
Investor confidence is mounting as Disney returns to its decades-old formula of cashing in on top franchises to grow its business. It's fine-tuning this formula for the streaming era, and the 10 films coming to theaters this year may make 2023 a blockbuster year for Disney.
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Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney and Warner Bros. Discovery. The Motley Fool recommends Comcast and recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
