NEW YORK (TheStreet) --Disney's (DIS) box office success with summer blockbusters Brave and The Avengers -- along with the opening of its Cars Land theme park -- may prove that the company's future growth lies beyond Mickey Mouse and with M&A.
In a media industry filled with bad mergers, broken synergy promises and assets that perform better independently, the success of Disney's Marvel and Pixar acquisitions should give investors reason to believe that they have uncovered a rare winning conglomerate formula, just as the company's stock hovers near all-time highs hit earlier in June.
The Avengers, from Walt Disney Studios
Over the weekend, Brave posted an estimated $66.7 million in box office receipts, proving that Pixar's first original movie concept since its $7 billion 2006 acquisition by Disney wouldn't flop as an unlucky 13th animated film after 12 previous openings stretching back to Toy Story topped the box offices. The weekend result, which is Disney-Pixar's fifth best ever opening weekend, is the latest positive data point in a series of tests to chief executive Robert Iger's belief that the media giant can use M&A to realize outsized revenue opportunities and synergies.
Earlier this summer The Avengers had a record opening, taking $207 million in box office receipts and grossing nearly $600 million domestically to date, according to Box Office Mojo.In June, Disney also opened the gates to Cars Land - a theme park reincarnation of Pixar's Cars movies -- to thousands of diehard fans who spent a night waiting to get a chance to see 'Radiator Springs' and 'Lightning McQueen' in person. In CEO Iger's plan, Disney can use its creative minds, parks, retail platform and media networks to make more money from owning Marvel and Pixar than either business could independently. To that end, Disney will push expected synergies, highlighted by the $1.1 billion put into updating its Disney California Adventure Park with a Cars theme. Nevertheless, investors should remain skeptical, given that media competitors have attempted the same strategy and failed miserably. From 2000 to 2009, the largest media conglomerates wrote down $200 billion in assets as a result of a bad acquisitions and misguided 'strategic' investments, according to The Curse of the Mogul, a sweeping study on why an overstretch of C-Suite ambition has destroyed shareholder value throughout the industry. But it's not just Disney's recent Pixar and Marvel success that may give credence to Iger's plan to grow the conglomerate as others like Time Warner (TWX) and McGraw-Hill (MHP) shrink. Since acquiring Marvel in 2009 - a deal that was initially viewed skeptically -- Disney's shares have nearly doubled to $46.70. In the last five years, the company's shares are up roughly 40% compared with a near 7% drop in the Dow Jones Industrial Average. Disney has also outperformed the broader market and peers like Time Warner, News Corp. (NWSA) and Viacom (VIA) year-to-date and in the past 12 months.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV