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3 Reasons Disney World Fans Should Buy Disney Stock

By Rick Munarriz – Oct 22, 2016 at 8:07AM

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The world's largest theme-park operator has a stock that's currently cheaper than a one-day ticket to one of its parks. It could be a compelling purchase at this point.

Image source: Disney.

If you had to guess what costs more -- a one-day ticket to any of Disney World's parks or a single share of Disney (DIS -1.83%) stock -- you might be surprised to learn that ownership is the wrong answer. Single-day Disney World tickets start at $97 during value season. Disney stock closed out the week at $93.03.

Now let's talk about when ownership is the right answer. If you're reading this, there's a better than fair chance that you're a Disney World buff. You're not alone. More than 54 million people visited one of the four theme parks last year, according to industry tracker Themed Entertainment Association.

A day at the parks can be exciting with richly themed rides, unique dining experiences, and playful character interactions. Taking that obsession to the next step by actually owning a piece of the media giant may be the furthest thing from your mind at the moment. Let's go over a few of the reasons you may want to reconsider that position. 

1. You know things will get better at the parks

One of the things holding Disney stock back has been sluggish theme-park attendance. There were fewer visitors to Disney World during the first half of this year than in the first half of 2015, and anecdotal evidence points to a third consecutive quarter of declining year-over-year attendance for the seasonally potent summer period that ended last month.

Larger than historically typical increases for annual passes and most tickets may be keeping visitors away, but a lack of new rides, lousy weather, and rival Universal Orlando's ability to close the gap with ambitious new rides and attractions also aren't helping. But it won't always be that way. Visitors to Disney's Animal Kingdom can see construction for the ambitious Avatar-themed expansion, paving the way for the area to open next year. Visitors to Disney's Hollywood Studios can see large swaths of the park walled off, as ground is being cleared for the Star Wars Land and Toy Story Land that will open in a couple of years.

Disney World is going to be a far more interesting place to visit in a few years than it is right now. As high as ticket prices may be now, they will inevitably be higher by the time Star Wars Land treats Disney's Hollywood Studios to the mother of all spikes in attendance. Disney's Florida parks aren't at their best right now, but Disney is still posting modest increases in the segment's revenue and operating profit. One can only imagine how well the segment will be performing as soon as fiscal 2017, with Pandora: The World of Avatar online.

2. You've seen what Disney can do with acquired properties    

Disney's movie studio has had a monster year, having a hand in most of 2016's biggest box office winners. We're not done yet. Moana will try to be the studio's next major animated hit next month. Rogue One: A Star Wars Story hits a multiplex near you in mid-December.

Disney spent billions to acquire Pixar, Marvel, and Lucasfilm, and these big bets continue to pay off. Theme-park visitors see the results. All four of Disney World's parks have rides or 3-D shows based on Pixar characters. Star Wars and Indiana Jones had starring roles at Disney's Hollywood Studios long before Lucasfilm was acquired. Disney is limited in what it can do with some of its acquired Marvel properties, but there are plenty of superhero franchises in fair play. 

Theme-park buffs know how Disney has excelled at promoting movies through its high-traffic parks. It's no coincidence that Disney is the star of the multiplex, and it will only become more so as it keeps tapping the rich characters of Marvel and Lucasfilm. 

3. Cord cutters won't be the end of Disney's media networks

A big drag at Disney lately is the fear that its ESPN and Disney Channel revenue will dry up as folks kiss their cable and satellite television subscriptions goodbye. Millennials and other consumers are turning to cheaper streaming services, and even Disney's ABC is vulnerable to the leveled playing field of video consumption. 

Once again, though, we find a situation that isn't as bad as it initially seems. Revenue and operating profits are holding up reasonably well. A trip to Disney World sees Disney playing up its Disney Channel characters through meet-and-greets and even dining experiences at Disney's Hollywood Studios. This strategy will give Disney Channel franchises visibility as it reaches out for content distribution deals through the leading streaming services. There's an entire ESPN-themed complex, helping making sure that it remains the top brand in live sports programming.

The recent weakness in its media networks segment may seem problematic as Disney's largest business, but this is another category where owning the world's busiest theme-park resort that welcomes more than 54 million annual guests can only help. Whether your next purchase is a one-day ticket or the stock, Disney's smart enough to make sure that they're both worth more in the future.

Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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