Some things never change. And even as shares of Burbank, Calif.-based Disney trade near their highest price relative to earnings since 2006, the stock could go higher, according to Todd Juenger, media analyst at Bernstein Research.
Disney's well-known brands and its ability to consistently generate profits from those brands is the main reason the stock could reach $125 over the next twelve months. Shares were rising 0.6% on Wednesday to $111.39, trading at 23.8 times earnings.
The Avengers franchise is a good example of Disney's overarching strategy. The Avengers brand began as a series of comic books, then in 2009, Disney bought Marvel, its owner and creator. Since then, Disney has grown the franchise to include a line of toys, video games, several TV shows, two movies based on the superhero team and eight on its individual members. The most recent film, Avengers: Age of Ultron, is already the tenth-highest grossing film domestically of all time. The initial Avengers movie is the third-highest.
While other studios struggle to sell consumer products based on their film properties, Disney generates six times as much revenue from its consumer products division than its competitors, according to Bernstein.
Disney's large movie slate is laid out for years in advance. In total, Diseny has named more than 30 movies to come out in the next four years, including both new content and additions to familiar franchises.
Avengers: Age of Ultron is expected to be one of the largest movies this year. Bernstein's Jeunger has projected a $1.5 billion in total gross revenue for the sci-fi film. Star Wars: The Force Awakens is a close second and is projected to gross $1.43 billion. Additionally, Disney has announced a sequel to the popular animated film Frozen, a sequel to Finding Nemo, and several more movies in both the Avengers and Star Wars universes.
Disney's slate of potential blockbusters provides ample opportunities to create consumer products and new theme park attractions, Juenger said. As revenue rises with Disney's movie pipeline, its shares are poised to go higher, Bernstein said.