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Why Are Analysts Focusing on Disney’s Studio Business?

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May. 1 2019, Published 7:17 a.m. ET

Disney’s revenues from studio business

Walt Disney (DIS) reported a 27% YoY decline in studio revenues, while it posted a 63% YoY fall in operating income in the first quarter of fiscal 2019, mainly due to the lack of any Star Wars movies in the first quarter. Disney’s studio revenue largely depends on the timing of movie releases.

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Disney’s movies

In Q1 2019, Disney released films such as Mary Poppins Returns, The Nutcracker, The Four Realms, Ralph Breaks the Internet, which earned only $388 million, in comparison to blockbuster movies such as Star Wars: The Last Jedi and Thor: Ragnarok in the prior-year quarter.

Notably, Disney’s latest movie Avengers: Endgame has broken the biggest opening weekend records after its worldwide release on April 26, and has earned an estimated $1.2 billion in its global debut. The movie has recorded $350 million in sales in the US alone.

The success of Marvel Studios’ Avengers: Endgame signals that the company’s studio division is poised to contribute to its bottom line significantly. J.P. Morgan and Citi have raised their price targets to $150 and $160, respectively, on the better-than-anticipated performance of Avengers: Endgame and the growing momentum of its studio business.

Disney is also set to release its long-awaited sci-fi sequel Star Wars Episode IX in December 2019, which is likely to boost the company’s revenues in the studio segment further. Also, Disney is scheduled to release Toy Story 4 in June 2019 and Frozen 2 in November 2019.

Box office report

According to the Box Office Mojo report, Disney’s Buena Vista Pictures is at the top of the domestic box office with a 29% market share. Comcast’s (CMCSA) Universal studios, AT&T’s (T) Warner Bros, Paramount, and Sony/Columbia (SNE) had market shares of 16.9%, 15.9%, 6.3%, and 6.2%, respectively, on a year-to-date basis as of April 28, 2019.

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