It was back on October 30, 2012 that we first covered how The Walt Disney Co. (NYSE: DIS) was getting a steal by acquiring the wonderful Star Wars franchise from George Lucas for a meager sum of about $4 billion. Sure, $4 billion is a lot of money to anyone. It was still too cheap for Star Wars. Our take now is that a huge portion of the gains that have come to Disney shareholders are tied almost entirely to Star Wars as Disney’s stock was at $48.38 on a dividend-adjusted basis after the deal was announced versus $56.36 now.
It would be easy to argue that the gains of Disney are tied to the rise in stocks in 2013. After all, Disney’s stock was at $49.79 as of the final closing bell price for 2012. That is a gain of 13.2% for Disney so far in 2013 versus a gain of more than 9% for the Dow Jones Industrial Average in the same 60-plus days.
As far as why Star Wars has added so much value, let’s just revisit some simple math. We said just over a year ago that Star Wars had generated over $30 billion in its life. In that we showed the offshoots, and it is a no-brainer that the Star Wars universe can have many offshoots as the company has now already telegraphed. After all, the Marvel universe is so vast that there are probably not enough hours in the day to watch all the current and possible future offshoots that could come from that for Disney. Disney is going to eclipse what George Lucas did, and we’d bet serious money that it has a far better writing cadre for the screenplays.
Another issue is that Disney will almost certainly be better at policing its copyrights and unlocking the value of the Star Wars copyright and trademarks. Forget the ranch and think about the stores and theme parks. The combinations are endless, even if they are possibly only temporary or irregular boosts throughout time.
Disney’s shares have more than doubled under the leadership of Bob Eiger. A group of shareholders still wants more say on pay and they still want a split in the role of CEO and chairman. So far, Eiger remains on top. Eiger is well respected on Wall St., and his purchase of Star Wars just added features for another couple of generations ahead (if not longer). In short, Eiger’s $4 billion purchase price for Star Wars will generate endless of billions in sales and profits ahead for Disney stockholders.
Disney has just in recent days joined the mega-cap club of stocks as its market capitalization rate is now above $100 billion. Shares hit a new all-time high on Wednesday at $56.84 but shares closed down 0.2% at $56.36 as profit takers came in. As a reminder, every person who has ever purchased Disney stock at any time before today could sell at a profit. The consensus analyst price forecast for Disney shares is $60.79 and the highest official price target is $70.00 per share.
Jon C. Ogg