Can Theme Parks Drive Walt Disney Co Stock Higher?

  • Disney is focused on improving its customer experience in its theme parks. It recently filed a patent for tracking guest activity at its parks.
  • The pipeline of projects in its Parks & Resorts segment shows a huge potential for profit growth.
  • The last quarterly results showed that its Parks & Resorts segment is one of the main drivers of the company's strong financial performance.

Walt Disney (NYSE:DIS) was recently awarded a U.S. Patent No. 9,393,697 allowing the entertainment company to acquire and track guests through a shoe-level camera at strategic locations. The move appears to be giving us a clue where the company may be focused on the future: theme parks.

According to Disney, the patent will enhance customization of the guest experience in their theme parks. It will take photos of guests’ feet from the moment they enter the theme park and photos are complemented with demographic information including name, age and other relevant information. In addition to that, another camera will also be used to track where their guests ride or eat based on their foot area. However, the company does not have current plans of rolling out this technology in their theme parks.

Also Read: 3 Reasons Why Walt Disney Co Stock Is A Good Buy

Theme Parks Expansion

The company has their hands full with the opening of new theme parks. For instance, they have recently launched a 963-acre Disneyland in Shanghai last June featuring a distinctive Chinese-style Disneyland. Analysts are bullish on the prospects of this venture, noting that they are expecting at least 10 million visitors in its first year of operations. The attractive Chinese market is pretty much a no brainer with Chinese middle class expected to grow in size and improved purchasing power.

Further, there are various Disney Park projects in the pipeline. First, there have been speculations that the company could capitalize on their 2012 acquisition of Star Wars rights through the construction of theme parks featuring Star Wars attractions. Imagine Star Wars fans being able to don a Jedi Master outfit and combating storm troopers. Another project that the company is looking at is the Toy Story Land in Florida, which would definitely attract younger consumers. Finally, there have also been plans to build a half-day Animal Kingdom park as well as revamping its New Kingdom restaurant and including new attractions in the existing theme parks.

Latest quarter 2016 Results

The  third quarter 2016 results showed that earnings per share for the 9-month period increased to $4.61, compared to $3.95 earnings per share recorded in the prior period. Both Parks & Resorts and Studio Entertainment were the main drivers, delivering double-digit gains for the company.

Financials of its Parks & Resorts would have posted better performance if not for a decline in earnings from their international operations, mainly from pre-operating costs from the opening of Shanghai Resort. On the other hand, studio entertainment increased mainly from higher home entertainment distribution results. As shown in the last 3 years, Parks & Resorts have gradually increased its contribution to the overall profitability of the company.

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Source: Disney 2015 Annual Report

Analysts expect growth of around 11% over the next 5 years. These forecasts could just be the “base-case” scenario considering the future growth of its theme parks and other businesses. The segment could drive the Walt Disney Co stock higher over the coming quarters.

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