Upon studying the transcript of Disney’s (NYSE: DIS) Nov. 8 earnings call I realized discussing it from the perspective of Strengths, Weaknesses, Opportunities, and Threats would be most beneficial.
Strengths
Disney’s major strengths lie in the Pixar/Marvel-based films and Parks and Resorts segment.
In the studio segment, revenue growth comes from movies rooted in sci-fi and fantasy nostalgia. The Avengers, based on a comic book team of super heroes, defeat evil bent on destroying the world. Wreck It Ralph focuses on a character from an arcade style video game. Overall revenue in the studio segment declined 8%; however, success from The Avengers ($1.5 billion gross) and Wreck It Ralph ($125 million gross so far) softened the blow and proves its success within the sci-fi sector, a fact that will benefit Disney over the long term.
People like having new choices and experiences when going to Disney’s parks, resorts, and cruises, and it shows in the results. Disney’s parks and resorts segment revenue increased 10%. Upgrades, increased attendance, hotel expansio,n and international expansion propelled growth.
Weaknesses
Most Disney movies not made under the Pixar and Marvel umbrella flopped in 2012. John Carter was a colossal flop, costing $250 million to make and worldwide gross barely exceeding that mark at $283 million. Frankenweenie worldwide box office gross of $63 million exceeds its budget by only $29 million. The question is if Disney can produce more original blockbuster hits. Disney studios needs a talent shakeup.
Opportunities
Other movies with familiar names slated for release in 2013 include Lone Ranger and Oz the Great and Powerful, up and coming Iron Man 3 and Monsters University
The acquisition of Lucasfilm, the highest-profiled opportunity to date, will add potential to Disney in the form of new blockbuster tales and new toy lineups and merchandise, providing potential new licensing revenue. Lucasfilm’s Industrial Lights and Magic division gives Disney the opportunity to provide state of the art special effects to the movie industry as a whole.
New opportunities with ESPN include adding the Wimbledon to its lineup and a new long-term relationship with Major League Baseball through the 2021 season.
Threats
An analyst at the conference call expressed concern regarding the decline of broadcast television, thus threatening long-term ad revenue. I share this concern. Video games, DVD rentals, DVR recordings, and internet downloads serve as threats to this medium.
Conclusion
Opportunities include a whole new string of potential Marvel and Pixar blockbusters slated for release in 2013. A greater international footprint will add exposure to all of Disney’s brands. Newer mediums from DVDs, DVR recordings, internet, and gaming will continue to threaten the traditional broadcast medium. However, the strengths and opportunities outweigh the weaknesses and threats, making Disney a viable long-term investment.
Read More: http://beta.fool.com/stockdissector/2012/11/18/disneys-earnings-call-swot-perspective/16658/?ticker=DIS&source=eogyholnk0000001
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