The Disney stock price is up nearly 13% since Sept. 1 on speculation that the newest installment of the Star Wars franchise, "The Force Awakens," will shatter box-office records.
"'The Force Awakens' will hit $1 billion (ticket sales) without blinking," said box-office analyst Phil Contrino in an interview with The Hollywood Reporter.
Already, many movie theaters across the United States are sold out of "The Force Awakens" tickets, sometimes for weeks after its debut on Dec. 18. Movie ticket sites like Fandango even temporarily crashed after Star Wars fans rushed to pre-purchase tickets after seeing the new movie's trailer.
For us, the big question is whether or not investors should capitalize on the hype...
Disney stock dipped nearly 15% in August after the company said it has lackluster prospects for cable television subscribers. Many analysts also believe consumers are losing interest in conventional cable packages.
In August, Walt Disney Co.'s (NYSE: DIS) revenue missed estimates - but only slightly. The company posted revenue of $13.1 billion, missing analyst consensus estimates of $13.2 billion. But Disney's EPS clocked in at $1.45, beating analyst consensus estimates of $1.42.
According to Money Morning Defense & Tech Specialist Michael A. Robinson, many trigger-happy investors misjudged Disney's Q3 earnings report, resulting in the August sell-off.
"We've seen a lot of overreaction this earnings season, as they beat on earnings (EPS) and just slightly missed on sales," Robinson said on CNBC after Disney released its earnings statement. "The end of the year is going to be very strong for them with the new Star Wars franchise coming out."
Disney Stock Price Has a Lot of Magic Left
Disney projects Star Wars merchandise sales alone to be around $5 billion in 2016, a hefty boost to its bottom line.
And it doesn't plan on stopping there.
The company also has plans to create a Star Wars-themed attraction in its amusement parks called Star Wars Land. The first attraction will launch on Dec. 1, 2015, right before the movie's premiere nearly two weeks later. Excellent timing.
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To also complement the new movie, Electronic Arts Inc. (Nasdaq: EA) is rolling out a much-anticipated Star Wars video game on Nov. 17 called "Star Wars: Battlefront." It seems Disney is trying to boost the Star Wars franchise in every possible commercial medium.
Money Morning believes it will pay off.
Disney stock has consistently beat the S&P 500 this year by over 10%. It has a lot of growth left for 2016, even if the Fed raises interest rates in December and market conditions dampen.
"I've got a $175 price tag on them (Disney) at 28 to 30 months," Robinson said in his Aug. 6 interview with CNBC. "...there's a lot of momentum here, and I think there's a lot of value ahead for Disney."
Many analysts think Disney might be slightly overvalued with a P/E ratio of nearly 24, but Robinson downplayed these fears.
"I'm not that concerned about it," Robinson said in his interview with CNBC, "I think there's still plenty of good growth. They've got a lot of new initiatives in digital content. Those are all high-margin operations."
Disney's dividend is $1.32 per share - for a yield of 1.14%. And just this year, Disney started paying out its dividend twice annually (two payments of $0.66). This is an attractive prospect for investors who want to hold Disney's stock for the long term.
Besides the new Star Wars movie, Disney plans to release in 2016 a new "Jungle Book" movie, a sequel to "Alice in Wonderland," and a "Finding Nemo" spin-off called "Finding Dory." All of these upcoming movies are widely anticipated and may also help Disney's stock power through 2016.
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