Star Wars Celebration 2022 in Anaheim kicked off on May 26, the day before Walt Disney (DIS -0.93%) released Obi-Wan Kenobi on Disney+. When asked for final remarks, Anakin Skywalker actor and Obi-Wan Kenobi star Hayden Christensen said, "This is where the fun begins."
The expression is a tribute to an identical line from Star Wars: Episode III -- Revenge of the Sith. But it's also a prelude of what could be to come for both Star Wars and Disney itself.
Down 45% from its high and around the same price as five years ago, Disney stock has not given investors a lot to smile about lately. However, the House of Mouse has some major projects in the works, and the tide could be turning. Here's why the fun may be about to begin for Disney stock and what makes the company a compelling, long-term investment right now.
Image source: Getty Images.
A great start to the year
Disney's stock may be down big. But the company has done everything in its power to rebound its business from the pandemic-induced setbacks -- namely, a slowdown in park and movie attendance.
Disney's domestic parks are thriving once more. The company reported its highest-ever second-quarter revenue and operating income from its parks segment. And that's despite omicron variant-related headwinds.
At the time of this writing, Doctor Strange in the Multiverse of Madness, Disney's first major film of 2022, is closing in on $375 million in domestic box-office revenue and has passed $877 million globally -- making it the best-performing film so far in 2022. The performance is even more impressive once you consider it does not include revenue from Russia and China.
A stacked deck
Doctor Strange has been a major hit. But as Christensen said, the fun is just beginning. A Buzz Lightyear film about the Toy Story character's background -- called Lightyear -- comes out June 17, followed by another Thor movie in July, the second Black Panther movie in November, and Avatar 2 in December. And those are just headline releases.
According to a tweet by Disney+ on May 31, Obi-Wan Kenobi was the most-watched opening weekend premiere in Disney+ history based on hours streamed. But similar to Doctor Strange, Obi-Wan Kenobi is just the tip of the iceberg for what Disney has in store on Disney+ in the coming years.
In the Star Wars universe alone, Andor is expected to hit Disney+ on Aug. 21, followed by Bad Batch season 2 in fall 2022, Tales of the Jedi in fall 2022, The Mandalorian season 3 in February 2023, Young Jedi Adventures in spring 2023, Star Wars: Visions 2 in spring 2023, and Star Wars: Skeleton Crew later in 2023. Needless to say, Disney is unleashing wave after wave of hits both in theaters and via Disney+ as a means to make up for lost time (and lost revenue) during the worst of the pandemic.
Disney is doing what it does best: telling stories, expanding character arcs, filling out backstories, and ultimately enriching the content of its most beloved universes through shows, movies, merchandise, and attractions at its theme parks.
Is fun enough?
There is no doubt that Disney has been patiently waiting for 2022 and 2023 to be its comeback years after a disappointing 2020 and 2021. But Disney is a business and needs to prove that these endeavors aren't just favors to its fans but can also boost its bottom line.
Contrary to some opinions, Disney is not running out of ideas. If anything, the impeccable performance of Doctor Strange and the opening reception of Obi-Wan Kenobi prove that Disney fans are as excited as ever for content. But because the long-term viability of Disney+ is uncertain and Disney still needs to prove it can grow park income and set new blockbuster records, Disney stock is languishing.
However, the long-term risk/reward for Disney stock has arguably never looked better. The company has done as good a job as anyone could have hoped by rebounding from its pandemic performance lows. Disney remains an incredibly influential, integrated media company that has been creating content for far longer than most studios as well as other streaming platforms.
Given the depth of its existing content and the opportunity to create more, streaming is a natural fit for Disney. Investors who believe Disney+ will be a long-term success are essentially getting the service for free, given Disney stock is the same price now as it was five years ago, which was before Disney's record fiscal 2019 year and the launch of Disney+ in 2019.
Add it all up, and it's easy to see why Disney could grow to become a far larger company than it is today. It's only a matter of time before the fun begins for Disney shareholders.
