Mickey Mouse’s 60th Birthday Party Gives Disney’s Shareholders Reason to Celebrate
On Thursday night, Walt Disney Co. Chief Executive Michael Eisner kicked off Mickey Mouse’s 60th birthday party at Disneyland as hundreds of guests, many wearing mouse ears and looking a bit silly, watched a parade and scrambled to take their turn on Star Tours.
Those who had the best time probably were Disney shareholders.
Mickey’s 60th comes at a good time because Walt Disney Co. has a lot to celebrate these days. The Disney empire has aged as well as has the venerable mouse that is its symbol. Over the past five years, profits have soared, leaving many Wall Street analysts thoroughly enchanted with the Magic Kingdom.
“Disney executives have a pretty simple goal. They just want to make money, and they are doing it,” said Harold Vogel, a film and entertainment analyst with Merrill Lynch in New York.
Buy Recommendation Reinstated
Last week, Vogel reinstated a buy recommendation on Disney stock. For most of the year Vogel had been on the sidelines because, he said, attendance at Disney’s theme parks had declined 6% to 7% from last year’s levels.
But to other analysts, the dip in attendance is not cause for concern, even though park visitors account for roughly 75% of the company’s revenues.
“We’ve had a terrible stock market, which has caused many people to decide not to take vacations,” said David J. Londoner, an analyst with Wertheim Schroder & Co. in New York. “But even when attendance falls, Disney still makes a lot of money.”
The numbers say it all.
Last year, Disney posted a profit of $444.7 million on revenues of $2.9 billion. That compares to a 1983 profit of $93.2 million on revenues of $1.3 billion.
For the quarter ended March 31, the company recorded a profit of $120 million on sales of $774.5 million. That compares to earnings of $91.2 million on sales of $706 million during the same period a year ago.
“An investment in Disney is a little like investing in a sleeping giant that has come alive again,” said Jeffrey Logsdon, an analyst with Crowell, Weedon & Co in Los Angeles. “It’s picking up momentum in a lot of different areas, and it’s got some unique features to that momentum.”
Growth Prediction
Logsdon predicts that Disney’s revenue growth will expand 15% to 20% annually over the next five years. “The management is extremely tough; they are not afraid to get that last dollar,” he said.
Disney management has been especially aggressive in raising ticket prices at Disneyland and Disney World. At Disney World for instance, the price of an adult day pass has increased from $18 in 1985 to $28 today. At Disneyland, adult admission prices have risen from $15 to $21.50 over the same period. Such increases during years of low inflation have led to impressive growth in theme park revenues, up from $1.3 billion in 1985 to $1.8 billion last year. Logsdon is projecting that park revenues will hit $2.1 billion in 1988.
Disneyland spokesman Mike Ferguson said the Anaheim park has received only mildly negative reactions to its price increases.
Analysts said several new attractions should prove to be strong draws as they open later this year and next year.
At Disney World, work is in progress on Typhoon Lagoon, which Disney is calling “the world’s largest water park.” The 50-acre facility will feature a 95-foot mountain with water slides, snorkeling among tropical fish and surfing on 6-foot, man-made waves. At Disneyland, a new ride scheduled to open next year--Splash Mountain, based on the Disney classic, “Song of the South”--will feature the world’s largest log-flume ride. And Euro Disney, a 4,200-acre park south of Paris, is scheduled to open in 1992.
Park Results Looking Good
While the parks are looking good, Disney’s filmed entertainment division looks even better. Disney and its Touchstone pictures unit have posted the highest box office receipts of any studio so far this year, with such blockbusters as “Good Morning, Vietnam,” and “Three Men and a Baby.” Its television unit also has several hits, including “The Golden Girls.” The filmed entertainment division earned $131 million 1987, compared to $33.7 million in 1985.
Another segment targeted for growth this year is the retail stores that sell Disney paraphernalia ranging from Mickey Mouse erasers to gold coins embossed with Disney characters. There are currently three such stores, one in South Coast Plaza, another in the Glendale Galleria and a third in San Francisco. The company plans to open 15 more.
All this adds up to a cheap stock price at a current levels. Disney shares closed at $61.25 Friday, up 75 cents for the day. Logsdon said he wouldn’t be surprised to see a share price of $75 by the end of the year. David Londoner of Wertheim Schroder is looking for earnings per share at $4.35, up from $3.23 a share in 1987.
