Breakout

Star Wars “Force” Drives Disney Shares to All-Time High

Breakout

Disney (DIS) reported quarterly earnings results last night that exceeded Wall Street estimates despite a slight decline compared to the same quarter last year. The Mouse House reported earnings of $1.4 billion, or 77-cents per share, on revenues of $11.3 billion. The numbers were good enough to push Disney's stock to an all-time high. Investors have seen their shares climb more than 35% in the last 12-months, almost triple the rise in the S&P 500.

If there was a fly in the ointment it was the Studio Entertainment division where revenues fell 5% due to tough comparisons against last year. In an effort to smooth out the performance of studios Disney recently spent $4 billion to purchase the Star Wars franchise from LucasArts.

The Star Wars deal recalls Disney's wildly successful purchase of Marvel on the surface. The difference is the installed base of Captain America, Hulk and the rest, had an installed base, tired though the franchises were. The Star Wars trilogy and standalone movies need a fresh cast and story line. As far as the average movie goer is concerned, Han Solo has been gone for 30 years.

Can Disney breath life back into Star Wars?

The Reformed Broker Josh Brown says yes. "Everything Bob Iger has done has worked," Brown tells me in the attached video. Pointing to the stock price, he not only gives Disney's CEO the benefit of the doubt, he all but goes fan-boy. "I think it's really exciting to have that franchise now in the hands of a company with the power that Disney has to really monetize this and put new product out there."

Brown is right about the magic Disney worked with Avengers, but the company wasn't starting effectively from scratch. Disney bought Pixar then Marvel to fill a gap in their business model. For the most part, little boys didn't care for Princesses. With that void now filled by Super Heroes, Star Wars is unlikely to give Disney the same bang for the buck as Marvel.

Then again, it doesn't have to. Disney's quarter demonstrated the power of the brand yet again. The biggest threat to the company is its power to continue to charge a premium to cable companies for the right to carry ESPN. Based on last quarter, Disney's dominance as a brand still has plenty of Force.

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