The Walt Disney
’s
DIS
latest movie Avatar: The Way of Water has surpassed $1 billion at the Global box office after 14 days of release.
Avatar became the fastest release to cross that box office’s $1 billion threshold since Spider-Man: No Way Home in December 2021 and the fastest in 2022.
Domestically in the United States, the movie, despite storm Elliott’s continued disruption, has crossed $300 million.
In the first week of release,
Imax
IMAX
reported that the latest Avatar movie grossed $435 million globally.
Of this, Imax delivered $48.8 million, which majorly came from the box office of North America and China as they recorded $16.5 million and $15.8 million, respectively, making Avatar: The Way of Water IMAX’s biggest December global opening of all time.
While Disney did not reveal the budget of the Avatar sequel, James Cameron, the director of the movie, cited that it has to be the third or fourth highest-grossing movie to break even. Being allowed to open up in China might enable the franchise movie to live up to past performance expectations.
The first Avatar movie released in 2009 grossed nearly $2.9 billion worldwide, with $259 million coming from China, making it the highest-grossing film of all time. It edged out “Avengers: Endgame” after a September 2022 rerelease as the movie added $73 million in ticket sales.
The latest box office performance of the Avatar movie will also help Disney fund its key growth drivers like Disney+.
Disney+ is facing significant competition in the streaming market from
Netflix
NFLX
and
Apple
’s
AAPL
Apple TV+ and is spending huge capital to bring out original content to fight against stiff competition in an extremely saturated market.
The Walt Disney Company Price and Consensus
The Walt Disney Company price-consensus-chart
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The Walt Disney Company Quote
Disney Banks on Disney+ Growth
Disney is focusing on its streaming service, which will cost the company capital in terms of content and marketing to fend off competition from Netflix and Apple.
Netflix is considered a pioneer in the streaming space and is enjoying the first mover’s advantage in the industry. Its solid content portfolio is a major growth driver.
Since the launch of Apple TV+, several Apple original series and films have earned more than 240 awards and 950 nominations, including the acclaimed SAG Awards, Primetime Emmy Awards and Critics Choice Awards. These accolades are catching viewers’ attention and helping it to win market share from Netflix and Disney.
In order to fight peers, we expect Disney to expand its Direct-to-Consumer spending by 12.5% year over year. As a result, Direct-to-Consumer operating loss is expected to be $4.88 billion for fiscal 2023 compared with $4 billion in fiscal 2022. The rising spending and losses are expected to keep consolidated margins under pressure.
Also, Disney has an extremely leveraged balance sheet portraying that it is lending more money to grow business in a highly fragmented market. Total borrowings were $48.37 billion as of Oct 1, 2022, compared with $46.6 billion as of Jul 2, 2022. Disney’s debt balance compares unfavorably with cash, cash equivalents and its current marketable investment securities balance of $11.62 billion.
All of this impacted the share price of Disney, which currently carries Zacks Rank #5 (Strong Sell) quite adversely. In the year-to-date period, its shares fell 45.7% compared with the Zacks
Media Conglomerates
industry’s decline of 39.5%.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
However, Disney expects Disney+ to reach profitability by 2024. It is also counting on releases such as Black Panther: Wakanda Forever, apart from Avatar: The Way of Water, to fuel its subscriber acquisition and fund its top-line growth in the coming quarters.
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