What 'Toy Story 4' Means For Disney

This year is a big one for Walt Disney Co DIS and its investors, with the launch of the Disney+ streaming service set for November. However, one analyst said on Monday that early success of “Toy Story 4” could be a driver for Disney stock in the near term.

The Analyst

Bank of America analyst Jessica Ehrlich reiterated her Buy rating and $168 price target.

The Thesis

“Toy Story 4” generated $118 million in domestic box office sales in its opening weekend, falling slightly short of recent tracking metrics suggesting an opening weekend of between $140 million and $165 million. It's still the third largest opening weekend of any movie this year, trailing “Avengers: Endgame” and “Captain Marvel.”

Using “Incredibles 2” as a guide, Ehrlich estimates “Toy Story 2” could ultimately generate a total of $608 million in domestic box office sales during its run. In the international market, “Toy Story 4” delivered $120 million in box office sales in its opening weekend, and Ehrlich estimates it could ultimately generate between $1 billion and $1.5 billion in international box office sales., roughly in-line with “Toy Story 3” at $1.06 billion.

Bank of America estimates that even at a production cost of around $200 million and with more than $100 million spent on marketing, “Toy Story 4” will generate about 23 cents in earnings per share for Disney over its lifetime.

The success of “Toy Story 4” is only one of the many reasons Ehrlich said she likes Disney stock ahead of the Disney+ launch.

“With a Disney+ launch date five months out and a variety of other catalysts visible over the interim (The Lion King on July 19th and Star Wars Land recently opened on May 31st at Disneyland and soon to be opened on August 29th at Walt Disney World), we continue to believe DIS shares are positioned to outperform, even more so when contemplating the optionality inherent in a DTC service with the potential to reach 90mn Disney+ and 60mn Hulu subs over time,” Ehrlich wrote in a note.

Price Action

Disney shares traded around $139.95 Monday morning.

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Photo courtesy of Disney/Pixar.