Disney's (NYSE:DIS) stock price recently hit an all-time high. Over the past decade, the stock has surged 440% and is up more than 20% just this year. After these massive gains, should investors take profits and head for the exits, or do more gains lie ahead? Read on for some insights into the answer to that question.
Isn't this fairy tale nearing its end?
It's understandable if you think that a company founded nearly a century ago would be nearing the end of its growth cycle.
But Disney is no ordinary business.
Disney's empire spans across its legendary theme parks and resorts, renowned movie studios, popular cable and broadcast networks, and powerful consumer goods licensing division. The broadly diversified entertainment conglomerate also owns an unequaled collection of brands assets. And each of its big four brands -- Disney, Marvel, Pixar, and Lucasfilm -- owns a treasure trove of popular characters and storylines. Enough to inspire many more years of blockbuster movies and hit TV shows.
But rather than just take my word for it, consider what Chairman and CEO Bob Iger had to say in a recent conference call:
When you look at what we have in the pipeline, whether it's in Marvel films, including AntMan this summer and Captain America and two more Avengers films and diversifying to Black Panther and Captain Marvel, or ... what we have that I mentioned earlier on the Star Wars front or what's going on in animation from both Pixar and Disney Animation. We've got a tremendous original film from Pixar this summer called Inside Out and another one called Good Dinosaur later in the year. First time in a calendar year we've ever released two Pixar films. And then we've got Toy Story IV, Incredibles, and Cars, and Finding Dory, which is a sequel to Nemo. Tremendous hand. So I think you're going to see over the next 5 years to 10 years -- certainly 5 years -- a real growth from the Studio because of all that.
Disney's movie pipeline has arguably never been stronger, and that also bodes well for the other divisions in Disney's empire. Blockbuster films help to drive excitement and traffic throughout Disney's vast (and expanding) collection of theme parks, resorts, and cruise lines. They also fuel growth in high-margin licensing revenue in Disney's booming consumer products division. And hit movies tend to spawn new TV shows, which help to further strengthen the popularity of Disney's characters and storylines among fans.
This virtuous cycle powers Disney's global marketing machine -- an unparalleled distribution system that's transformed the House of Mouse into a cash-spewing juggernaut. And to its credit, management remains committed to returning that free cash flow to shareholders in the form of dividends and value-creating share buybacks.
So should Disney stock be sold?
The desire to bank profits can be powerful, but investors might be best served by resisting the urge to sell their shares in Disney. With a multiyear pipeline of potential blockbuster films and a global marketing machine poised to wring profits from its brand assets, Disney's future could continue to be magical for many years to come.