'Star Wars: The Force Awakens' Could Boost Entire Entertainment Industry, Experts Say
- Shares of Walt Disney Co (NYSE: DIS) are up 19.52 percent year-to-date, while those of Time Warner Inc (NYSE: TWX) have declined 15.05 percent during the same period.
- Barton Crockett of FBR & Co. has maintained an Outperform rating on both companies, with a price target of $124 for Walt Disney and of $91 for Time Warner.
- TV network companies are poised to report their 3Q15 earnings, and Crockett expects “Star Wars” to be the primary driver of performance across the entertainment sector.
According to the FBR report, “Disney's Star Wars reboot is the main source of excitement in the group. We also see pockets of audience and ad trend improvement that, in some instances, could be modestly helpful, versus low expectations.”
'Star Wars: The Force Awakens'
Analyst Barton Crockett believes that the F1Q16 results would be more important than the F4Q15 performance, since the former would be largely driven by "Star Wars: The Force Awakens," which is scheduled to open on December 18.
“Early indicators support the bull argument that this could become the biggest film ever, helpful for consensus views of this movie and the sequels to come,” Barton stated.
Pre-sale of the movie’s tickets has already begun, with record purchases across the various theaters. In fact, Imax reported first day sales of $6.5 million, which was six times the amount raked in "Dark Knight Rises," "Hunger Games: Catching Fire", and "The Avengers."
In addition the 3Q15 licensed product sales were also significantly above expectations. The F4Q15 EPS estimate has been raised from $1.09 to $1.12.
“Growth trends in F4Q15 should be skewed positively by an extra week in the quarter, including cable advertising… with mix noise from an exit from NASCAR, versus the addition of the U.S. Open,” the report added.
Benefit from HBO Now
Crockett believes that Time Warner is well positioned to benefit from the consumer interest in HBO Now, the new streaming service at $15 per month, “which should mute fears about exposure to cord cutting and, over time, boost earnings.”
HBO Now is expected to enhance the positive of the leading TV network, which offers “durable content and peer-high capital returns to investors,” the report stated.
The 3Q15 EPS estimate for Time Warner has been raised from $1.05 to $1.09, driven by the timing of TV syndication delivery at Warner Bros and HBO expenses.
“We also factor in disappointing film performance, including an estimated $60M loss in 4Q15 on Pan, released on October 9. We estimate 600,000 subs to HBO Now by the quarter's end,” Crockett added.
Latest Ratings for DIS
|Jan 2017||Morgan Stanley||Upgrades||Equal-Weight||Overweight|
|Jan 2017||BMO Capital||Downgrades||Market Perform||Underperform|
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