Marvel movies have been a huge hit for the Disney Company. In eight years, the 13 films in the Marvel universe have earned over $4 billion domestically and $10 billion globally in ticket sales alone. The newest venture, opening November 4th is “Doctor Strange” – which is tracking for a better opening than last year’s “Ant-Man”.
The problem for Disney investors is that “Doctor Strange” cost $165 million to make versus $130 million for “Ant-Man”. Theatergoers also liked what they saw in Rudd as the thief-turned-superhero, giving the film an “A” CinemaScore. Word of mouth led to a decent run in the theaters that ended with the film grossing over a half-billion worldwide. A higher budget for Doctor Strange means a higher hurdle for profitability, which means reviews and early audience reaction are crucial, especially if the tracking data is right and the film opens just marginally higher than “Ant-Man” did.
Marvel’s master of the mystic arts also comes to the screen at a transitional moment for Disney as a company. Analysts are expecting fiscal 2016 revenue to improve 7% and adjust profit to grow 12.2%, but the weight of cable subscription losses could drag down the stock yet again. A significant beat at the box office for “Doctor Strange” combined with reports of outsized growth in the Studio Entertainment and Parks and Resorts division could help prevent another slide.
Although this analyses sounds dire and Disney might not be on the top 10 list of companies to invest in right now, don’t go running for the hills yet. A down tick for Disney could also mean an upswing eventually. Time will tell.
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