I've been meaning to increase my stake in Walt Disney (DIS 0.59%) for a long time. Finding the right time -- largely when I can stop writing about the media giant long enough to fit a transaction within my trading guidelines -- is typically a challenge, but I had a window open earlier this week.
I doubled my stake in Disney on Monday. Why did I back up the truck for the House of Mouse on Monday? I have my reasons, and I want to share them with you.
Image source: Walt Disney.
1. Movies are back
We're comfortable returning to the multiplex again, and no one is better on the silver screen than Disney. It had all six of the country's highest-grossing films in 2019, the last full year before the pandemic shut multiplexes down. It already has the top draw of 2021, and its 2022 release slate is outstanding. With a hit film now able to cash in at both the movie house and in the streaming market, it pays to be the king of content.
2. Theme parks are back
Despite being closed for months in Florida and more than a year in California, Disney's gated attractions are hopping these days. It's not just Disney. Rival Comcast announced on Thursday that Universal Orlando just posted the most profitable quarter in its history. It would be a surprise if Comcast neighbor Disney World didn't also have a monster quarter when it reports in two weeks.
3. Disney+ is a big winner
It's easy to roll out a winning premium streaming service when you're a hit factory, but Disney+ has captivated audiences with unexpected hits including The Mandalorian and WandaVision that take fresh stabs at Disney's unmatched intellectual properties. There are more than 116 million subscribers to Disney+ worldwide, and that's stunning for a service that wasn't even around two years ago.
4. Disney World is poised for a record year
Disney World turned 50 earlier this month, and the world's largest theme park operator kicked things off with an 18-month celebration. The resort will get two new bar-raising family friendly roller coasters and a ton of new experiences by the time the last of the confetti drops, and if Central Florida's theme parks are doing fine now just imagine how they'll be faring when the COVID-19 crisis passes and lucrative international visitors come back.
5. Genie+ and Lightning Lane+ are game changers
Disney's domestic theme parks are starting to charge for access to its expedited queues. It's a trick that its rivals have been playing for years. Diehard Disney park enthusiasts aren't happy, but Disney World and Disneyland just became that much better an experience for non-locals willing to spend a little more money to enjoy as many attractions as they can before heading back home.
Genie+ -- a platform where guests pay $15 a day for access to a couple of one-hour return windows throughout the day -- is a high-margin moneymaker. Tapping its most in-demand rides as Lightning Lane+ attractions that incur an additional fee for one-time access is another cash cow. When Disney starts shattering theme park revenue and profitability records next year, you will probably have to thank Genie+ and Lightning Lane+ for making it happen.
6. CEO Bob Chapek isn't as bad as you think
A lot of Disney fans -- more specifically the annual passholders who pay between $1 and $3 a day for year-round access to Disney's gated attractions -- don't like the guy in the corner office. They blame him for cost cutting and raising prices during a pandemic. There's even a Change.org petition closing in on 50,000 virtual signatures asking Disney's board to fire him because he's too interested in maximizing the company's profit potential. Can you imagine that?
Theme park fans are complicated. They hate how Disney parks are relying on existing intellectual properties to inspire its latest attractions, but they were also buzzing earlier this week at the new Lightyear trailer -- Buzz Lightyear's origin story that hits theaters next summer. I may have been tongue-in-cheek when I suggested that Chapek is a candidate to be CEO of the year, but he was elevated to the helm in the middle of a tempest early last year and taking over for a beloved leader who was going to be a hard act to follow. Disney stock is up 33% since he took over as CEO 20 months ago. He's not going anywhere.
7. Disney stock is somehow trading lower in 2021
All of the gains under Chapek's tenure came in 2020. The stock is trading 6% lower this year through Thursday's close, a shock in both an up year for the general market and one in which Disney has routinely trounced profit targets. The calendar year began with Disney keeping its movies out of theaters. Some of its theme parks and all of its cruise ships were out of service. Disney is brilliantly positioned as a blanket play on the economy opening back up -- and here we are with a year-to-date loss? You can't keep the top dog among entertainment stocks down for long.
