2 Reasons Why Disney Stock Will Stay Red Hot: <i>Frozen</i> and Shanghai

NEW YORK (TheStreet) -- Walt Disney (DIS) shares were Wednesday after the world's largest entertainment company reported that profit in its recently completed quarter climbed to $1.9 billion from $1.5 billion a year ago. 

The biggest driver to expanding margins was the blockbuster hit, Frozen. Disney made it clear that it plans to continue to build on that franchise.  In fact, Frozen, which wasn't expected to do as well as it did at the box-office, has been elevated by Chief Executive, Bob Iger to one of the company's Top 5 franchises. 

If the economic recovery gains further strength, Disney's amusement parks the world over are expected to welcome more visitors. 


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Demand for Frozen merchandise is hot, so much so that mommy bloggers have even noticed eBay sellers listing limited edition Frozen character dolls for as much as $4,500. Global success of Frozen has also boosted the film to become the best-selling title ever released on Blu-ray and digital. That's quite an accomplished considering all the movies that have come before it but Frozen's success says as much about Disney's presence in international markets.

During the company's investor conference call earlier today, Iger said that demand for Frozen merchandise helped boost foot-traffic at The Disney Stores, where 9 out of the 10 highest selling items in the quarter was merchandise related to the film. Meanwhile, discount retailers, Walmart (WMT) and Target (TGT) have also been light on inventory.

Source: Disney Frozen Gallery

The Disneyworld theme park in Orlando is also seeing overwhelming demand for Frozen. Resort visitors who are privileged to get so-called, "Magic Hours," or extended time at the parks, will line up at 8:00am for the chance to meet and greet Anna and Elsa. The waiting time to get your photo op: as long as three hours. Plus, the long lines persist throughout the day.

In response, the company is looking to add more attractions related to the Frozen, possibly within the next five years.

Bob Iger adds, "The passion for this film and these characters is so extraordinary, so well beyond what we ever even imagined, that it would be hard to believe that it wouldn't sustain itself over a fairly long period of time." A Broadway show staring Anna and Elsa is also currently in development.

Disneyland Hong Kong set new attendance and occupancy records in Q2 and construction on Shanghai Disneyland is underway. The company says it has learned from mistakes made with the opening of Hong Kong. It was criticized for being too small, and under-estimating the demand.


Source: Disney Parks

The company tells investors and analysts there are an estimated 330 million potential guests within a three-hour travel radius of the Shanghai Resort, and by the time, it opens its gates in late 2015, China's travel market is expected to be 34% larger, compared to in 2012.

Disney projects the number of upper middle-class and affluent households to grow by 18%, per year for most of the next decade. Those trends factor into its recent decision with partners in Shanghai to pump in an additional $800 million investment into its expansion.

Shanghai Disney will be the first Disney resort in mainland China. Along with the theme park, it will two themed hotels, and a large retail, dining and entertainment venue. It is expected to open at the end of 2015.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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