Don’t let the latest box-office numbers fool you: Disney has evolved beyond being just about movies.
Last week, Wells Fargo issued a bullish overweight rating for Disney, with 41% upside at the $159 price, per Nasdaq.com. It found that Disney’s Experiences unit (think Parks, Cruises) has much more growth potential compared to its Media businesses (movies, TV).
This trend toward Experiences was underlined by Disney’s “Tron: Ares,” which had a disappointing weekend at the box office. Its $33.5 million domestic opening fell $10 million below predictions, according to the Hollywood Reporter.
Yet Wells Fargo is high on Disney’s future, regardless of how its films perform. It explained:
We think Disney’s assets are growing and maturing, creating more predictability in EPS upside that will engender a rerating.
Wells Fargo
Translation: Disney is diversified beyond its movies and TV, boasting world-renowned theme parks, cruise ships, and live shows, offering a major justification for bullishness.
Disney Experiences unit businesses have growth potential
Wells Fargo analysts were particularly optimistic about the future for Disney’s Experiences unit.
“We’re most bullish on Experiences: In FY27E, we think it’ll be 55% of [operating income] and the No. 1 source of upside for the medium term,” said analyst Steve Cahall.
Parks are set to be the crown jewel and number-one revenue driver within Experiences, with sustainable spending growth and premiumization efforts highlighted for their recent strength.
Related: Disney World raised ticket prices, now increases essential fee
Case in point: Families spend $150 per hour per person at Disney parks, compared to high-value concerts at $830 an hour and the NFL at $220 per hour.
So while it may seem to many that Disney vacations are unreasonably expensive, the relative discount has fueled repeat customers and the loyalty for which Disney (and its “Disney Adult” superfans) are known.
Disney business unit breakdown(operating income for Q3):
- DisneyExperiences: Parks, Cruises, and consumer products (55%, 2.5 billion)
- Disney Entertainment: Entertainment and media, including Film, TV, streaming (22%, 1 billion)
- ESPN: ESPN networks, ESPN+, and ABC (22%, 1 billion)
Source:Disney
The success of Parks is closely followed by that of Cruises, another business under the Experiences umbrella. Disney’s fleet is valued at $38 billion, and its profits are a source of stable, long-term growth.
Wells Fargo projects Cruisesto be the single largest driver of growth for the Walt Disney Company over the next decade, behind Parks.
Parks are getting a little extra shine for their upside, too. For his efforts in creating the highest-performing part of the most future-proof unit at Disney, Parks Chairperson Josh D’Amaro has become a top candidate to succeed Bob Iger as CEO or co-CEO, according to recent reporting by CNBC.
All of this change has led to investors rethinking Disney as a brand.
Disney no longer a media stock
But where would Disney be without its media intellectual property (IP) such as Star Wars, Marvel, and Mickey Mouse?
Fair question, but that’s exactly why this works. Disney’s pre-established media properties (iconic films and related IP) serve as the foundation that will allow Parks, Cruises, and other Experiences to thrive going forward.
Take Disneyland’s new dedicated Star Wars section, Galaxy’s Edge, whose opening drove Parks’ revenue up 8% in each of the subsequent two quarters.
So, according to Wells Fargo, Disney is now “an Experiences stock with a media heart.”
This reconsideration of how investors think of Disney is backed by solid Experiences unit growth numbers and a focus on de-risking some of Disney’s more traditional media offerings.
Analysts described iconic brand ESPN as “increasingly de-risked,” predicting 32 million subscribers by 2030. They also projected modest incremental margins of approximately 40% for other direct-to-consumer media products (films, TV, streaming) as a result of pricing and bundling efforts.
More Disney:
- Disney World shares permanent closing date for popular restaurants
- Dave Ramsey warns Americans on critical Medicare mistake to avoid
- Disney announces drastic theme park changes no visitor wants
For my money, this all translates to upside and room to grow for Disney’s Experiences built off rock-solid existing IP.
For the foreseeable future, movies, TV, and original content will be less of a priority as they have been less reliable as a source of growth. This is why the revenue shortcomings of “Tron: Ares” are no big deal to Disney or its backers.
Of course, if the content is less risky (i.e., live sports on ESPN), investors like that. If not (think any original IP, such as movies, TV, or games), that might be a harder sell.
“Tron: Ares”: box-office skid
Based on the 1982 classic “Tron,” Disney’s “Tron: Ares,” the third film in the Tron-versefollowing 2010’s “Tron: Legacy,”fell short of expectations this weekend. Who could have predicted this for a Jared Leto-led film?
Sarcasm aside, “Ares”fell about $10 million short of opening-weekend expectations, earning $33.3 million domestic and $60 million global on its opening three days.
The $180 million-budget film may be headed along the same trajectory as the much-better-regarded “Blade Runner 2049,”according to Deadline’s coverage:
Essentially, the audience didn’t expand on this 43-year old Disney sci-fi franchise to the young-ins, with only 30% under 25 attending.
While young people aren’t flocking to this movie, there was some hope for premium formats. Premium formats include any format with additional features that enhance the experience, IMAX or 3D theaters being prominent examples.
“People chose to see the movie in a premium format with 67% coming from PLF screens, Imax, 3D, ScreenX, or DBox. The 3D theaters alone yielded 31%. Imax at $6.6M delivered 20%. Disney has Imax for another week on the movie, and 3D for the entire run,” reports Anthony D’Alessandro.
Comscore/TheStreet
As a final blockbuster ahead of the more artistic fall movie season, the legacy of “Tron: Ares,” not to be confused with that of “Tron: Legacy,” will be an uninspiring end to a less-than-profitable summer.
Disney movie buffs will have to hope that “Zootopia 2,” slated for November 26, or the live-action “Moana” remake, coming July 10, 2026, will right the ship.
Nonetheless, investors shouldn’t be too bothered, as a bright future built on Disney’s singular Experiences offerings is more important than any one movie’s performance.
Related: Netflix makes a major move to win over subscribers
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