The Walt Disney Company (DIS -0.81%) was devastated at the pandemic's onset. Several of its sources of revenue depend on bringing large groups of people together in person. In particular, The House of Mouse regularly enjoys a dominant position at the box office. Indeed, Disney's movies have been topping the charts for decades.
That said, government-mandated closures of movie theaters forced Disney to launch movies straight to its streaming service or delay launches altogether. Thankfully, business restrictions have eased, and folks are returning to movie theaters, and that has helped Disney's latest release, Dr. Strange in the Multiverse of Madness, deliver fantastic results.
Image source: Getty Images.
Success at the theaters is MARVEL-ous
Since its widespread release, the Dr. Strange sequel has garnered $690 million in box office revenue in the first couple of weeks. Typically, studios like Disney and movie theater chains like AMC Entertainment Group will negotiate a remuneration near the 50/50 range. If Disney negotiated a similar rate for this latest movie, it would gain roughly $350 million in top-line sales.
That's excellent news for The House of Mouse, which generated $4.7 billion in box office revenue in its fiscal year 2019 and $4.3 billion in 2018. The loss of revenue from theatrical distribution due to the pandemic was a substantial hit to Disney's business. The loss was overshadowed by the more significant losses it absorbed from the closure of its theme parks but was massive nonetheless. Its studio entertainment segment derives additional revenue from sales through home entertainment channels like Blu-Ray discs and streaming rentals. Overall, the segment, which relies on successful movie theater releases, generated $2.7 billion and $3 billion in operating income, respectively, in 2019 and 2018.
DIS Operating Income (Quarterly) data by YCharts.
What's more, the film has created a lot of publicity for Disney and the Marvel franchise. In a few short weeks, the Dr. Strange film will hit Disney+. That anticipation and eventual availability could provide a subscriber boost on Disney+. Already, Disney's flagship service boasts 138 million subscribers, and the addition of hit films will likely build on that momentum.
Disney has a robust slate of potential blockbusters launching through the rest of this year, including a Toy Story origin story, Thor: Love and Thunder, a sequel to the enormous success Avatar, and more. As a result, Disney investors have lots to look forward to from the segment this year.
What this could mean for Disney investors
DIS PS Ratio data by YCharts.
The results from the Dr. Strange movie are evidence of another step forward for Disney in its recovery from the pandemic. Of course, Disney is far from full strength, and the pandemic is far from over. That said, Disney's stock is trading at a price to sales ratio of 2.6, near the low point it hit at the pandemic's onset when so many of its lucrative operations were forced to shut down with uncertainty about when they would reopen.
Investors can add Disney to their list of stocks to buy, and then they can take advantage of any dips as buying opportunities. Once Disney is back at full strength, the stock might be much higher, and investors may have missed an excellent chance to buy an iconic business at a bargain price.
