Few Walt Disney (DIS) observers saw its latest blockbuster coming.
But Doctor Strange is boosting the studio's revenues. The fantasy film is ruling the box office for the second week, outperforming animated musical Trolls from 21st Century Fox. As the movie holds its ground against new releases like Viacom-controlled Paramount's sci-fi film Arrival, Disney is making lots of money.
The success of Doctor Strange puts to rest concerns about superhero saturation, and is helping Disney smile amid the turbulence of ESPN subscriber losses. Disney is one of the best value plays around. The companies shares were roughly flat in late Tuesday trading.
The movie's success has meant that Disney, the shares of which have shot up by nearly 8% in the last month, has gotten a reprieve. Following a rare earnings miss, bears were ready to pounce on ESPN's double whammy of higher programming and production costs and lower revenues from affiliate fees and advertising. Subscriber woes have continued.
Doctor Strange beating expectations has raised the expectations from other Disney bets such as the upcoming releases Rogue One: A Star Wars Story and Moana. These could raise Disney's global ticket sales to well above $7 billion. That kind of revenue will make Disney a growth stock winner for the long haul.
Much like Guardians of the Galaxy and Ant-Man, Doctor Strange did not have a crazy pre-release. This is testimony to Disney's recent ability to pick characters and stories that engage viewers.
Disney's timing with Strange was good. The fantasy tale about a doctor who becomes the world's most powerful sorcerer and main defender of the world against dark forces has perhaps taken people's mind off the unpleasantries of the recent election.
A sequel of Doctor Strange is not unlikely. This boosts the value of the Marvel cinematic universe (Doctor Strange is the 14th from the comic book publisher). Merchandise sales should rise.
Disney's superhero box office accomplishments, driven by Marvel, has for some time now led competitors such as Time Warner's Warner Brothers. Potential investors should keep the Marvel premium in mind when they invest in Disney shares, which trades at more than 16 times forward price to earnings.
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