Insights

Disney Has an Ace in The Hole for 2022, and It’s Not What You Think

On May 6, Walt Disney (NYSE: DIS) released Doctor Strange in the Multiverse of Madness. It marks Disney’s first major blockbuster of 2022 after two years where Disney was pressured to release its films solely through Disney+ or incur much lower box office ticket sales.
Lightyear is expected to come out on June 17, followed by Thor: Love and Thunder on July 8, Pinocchio in the fall, Black Panther: Wakanda Forever on Nov. 11, Guardians of the Galaxy Holiday Special in December, and Avatar 2 on Dec. 16. This list includes only the major blockbusters and leaves out highly anticipated releases on Disney+, such as the Obi-Wan Kenobi series, which premieres May 27. 
2022 could end up being one of Disney’s biggest blockbuster years of all time and put the company closer to its record 2019 form — a year in which it grossed over $3.7 billion at the box office and raked in $11.1 billion in sales for its studio entertainment segment. Here’s a reminder of just how powerful Disney’s movie business is and why it could be a key driver that Disney investors should pay attention to in the years to come.
Image source: The Walt Disney Company.

Disney’s movie business was at an all-time high pre-pandemic
In the 20-year period from 1995 to 2014, Disney’s best year in the film industry came in 1996. That year, it generated $2.5 billion in inflation-adjusted gross box office revenue and over 20% box office market share. But from 1997 to 2014, Disney never passed 17% market share and reached as low as 10.3% in 2008.
However, Disney’s movie business reached a tipping point in 2015 and never looked back. From 2015 to 2019, Disney earned over $15 billion in inflation-adjusted gross box office revenue — averaging $3 billion per year. In that five-year period, it never held less than a 21% market share of the box office and reached a 33.3% share in 2019 after producing a record, inflation-adjusted gross revenue of $3.8 billion.

Year

Number Of Top 10 Grossing Films

Gross Revenue From Top 10 Films

No. 1 Grossing Film

Total Inflation Adjusted Gross Revenue

Market Share

2021

3

$573 million

No

$922 million

20.2%

2020

1

$125 million

No

$225 million

11%

2019

7

$3.439 billion

Yes

$3.747 billion

33.3%

2018

5

$2.418 billion

Yes

$3.156 billion

26.3%

2017

4

$1.722 billion

Yes

$2.443 billion

21.7%

2016

6

$2.293 billion

Yes

$3.120 billion

26.1%

2015

4

$1.669 billion

No, but Number 2

$2.546 billion

21%

2014

4

$1.039 billion

Yes

$1.798 billion

15.6%

2013

4

$1.176 billion

Yes

$1.962 billion

16%

2012

2

$861 million

Yes

$1.805 billion

14.2%

Data sources: Box Office Mojo, the-numbers.com. 
Numbers fell in 2020 and 2021 — mainly because of the pandemic-induced decrease in demand, the release of some highly anticipated films only through Disney+, and a decision to delay films for later years. However, it is undeniable that Disney’s investments in Pixar (Jan. 24, 2006), Marvel (Dec. 31, 2009), Lucasfilm (Oct. 30, 2012), and 21st Century Fox (March 20, 2019) have all compounded Disney’s ability to dominate the box office.
Between 2012 and 2019, Disney produced the No. 1 grossing film every year except for 2015, which is a bit of a technicality given that Star Wars: Episode VII – The Force Awakens grossed $303,356, or just 0.05% less than No. 1-ranked Jurassic World.
Focus on the big picture
In the first quarter of fiscal 2022, Disney proved that its park business has already rebounded close to its full strength after notching a holiday quarter that resembled pre-pandemic levels. However, Disney’s movie business is still far from its peak performance. But this year could show a lot of improvement. Disney+ has done nothing but exceed expectations. But sentiment toward streaming is down because of Netflix’s (NASDAQ: NFLX) concerning subscriber losses — which begs the question of when, Disney+ will reach profitability, if ever.
Investors considering Disney stock now can pick up shares 45% down from their all-time high, at a lower price than their pre-pandemic level, at a time when market optimism is low, and when recession fears are high. Moreover, Disney hasn’t proven its parks and movie business will be able to book new all-time-high profits, and Wall Street is essentially valuing Disney+ at next to nothing given the stock is lower now than before its launch.
Bears may think that Disney stock is at a tipping point, but the stock looks inexpensive for those who believe in the long-term growth of Disney’s business and the power of its brand. Instead of focusing solely on Disney+ and whether its growth slows or not, it may be better to focus on the parks, experiences, products, media networks, and studio entertainment segments. These are the real cash cows. If those segments are healthy, Disney can afford to make no money off Disney+ for a few years, which will give it time to build out the service so it can reach its potential.
Disney’s ace in the hole for 2022 isn’t a rebound in the parks business or better-than-expected Disney+ growth — although that would help. Rather, the ace in the hole is a reminder that Disney makes some of the world’s biggest box-office hits, that it will likely continue to do so for years to come, and that it purposely delayed the release of some of its biggest hits for 2022 in anticipation of a rebound in movie theater attendance. For that reason, Disney stock looks like a great value now.
Daniel Foelber has positions in Walt Disney and has the following options: long January 2024 $145 calls on Walt Disney, long July 2022 $145 calls on Walt Disney, long June 2022 $170 calls on Walt Disney, short January 2023 $140 calls on Walt Disney, short January 2024 $150 calls on Walt Disney, short July 2022 $150 calls on Walt Disney, short June 2022 $175 calls on Walt Disney, short November 2022 $120 calls on Walt Disney, short October 2022 $135 calls on Walt Disney, and short September 2022 $115 calls on Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy. –

On May 6, Walt Disney (NYSE: DIS) released Doctor Strange in the Multiverse of Madness. It marks Disney’s first major blockbuster of 2022 after two years where Disney was pressured to release its films solely through Disney+ or incur much lower box office ticket sales.

Lightyear is expected to come out on June 17, followed by Thor: Love and Thunder on July 8, Pinocchio in the fall, Black Panther: Wakanda Forever on Nov. 11, Guardians of the Galaxy Holiday Special in December, and Avatar 2 on Dec. 16. This list includes only the major blockbusters and leaves out highly anticipated releases on Disney+, such as the Obi-Wan Kenobi series, which premieres May 27. 

2022 could end up being one of Disney’s biggest blockbuster years of all time and put the company closer to its record 2019 form — a year in which it grossed over $3.7 billion at the box office and raked in $11.1 billion in sales for its studio entertainment segment. Here’s a reminder of just how powerful Disney’s movie business is and why it could be a key driver that Disney investors should pay attention to in the years to come.

Image source: The Walt Disney Company.

Disney’s movie business was at an all-time high pre-pandemic

In the 20-year period from 1995 to 2014, Disney’s best year in the film industry came in 1996. That year, it generated $2.5 billion in inflation-adjusted gross box office revenue and over 20% box office market share. But from 1997 to 2014, Disney never passed 17% market share and reached as low as 10.3% in 2008.

However, Disney’s movie business reached a tipping point in 2015 and never looked back. From 2015 to 2019, Disney earned over $15 billion in inflation-adjusted gross box office revenue — averaging $3 billion per year. In that five-year period, it never held less than a 21% market share of the box office and reached a 33.3% share in 2019 after producing a record, inflation-adjusted gross revenue of $3.8 billion.

Year

Number Of Top 10 Grossing Films

Gross Revenue From Top 10 Films

No. 1 Grossing Film

Total Inflation Adjusted Gross Revenue

Market Share

2021

3

$573 million

No

$922 million

20.2%

2020

1

$125 million

No

$225 million

11%

2019

7

$3.439 billion

Yes

$3.747 billion

33.3%

2018

5

$2.418 billion

Yes

$3.156 billion

26.3%

2017

4

$1.722 billion

Yes

$2.443 billion

21.7%

2016

6

$2.293 billion

Yes

$3.120 billion

26.1%

2015

4

$1.669 billion

No, but Number 2

$2.546 billion

21%

2014

4

$1.039 billion

Yes

$1.798 billion

15.6%

2013

4

$1.176 billion

Yes

$1.962 billion

16%

2012

2

$861 million

Yes

$1.805 billion

14.2%

Data sources: Box Office Mojo, the-numbers.com. 

Numbers fell in 2020 and 2021 — mainly because of the pandemic-induced decrease in demand, the release of some highly anticipated films only through Disney+, and a decision to delay films for later years. However, it is undeniable that Disney’s investments in Pixar (Jan. 24, 2006), Marvel (Dec. 31, 2009), Lucasfilm (Oct. 30, 2012), and 21st Century Fox (March 20, 2019) have all compounded Disney’s ability to dominate the box office.

Between 2012 and 2019, Disney produced the No. 1 grossing film every year except for 2015, which is a bit of a technicality given that Star Wars: Episode VII – The Force Awakens grossed $303,356, or just 0.05% less than No. 1-ranked Jurassic World.

Focus on the big picture

In the first quarter of fiscal 2022, Disney proved that its park business has already rebounded close to its full strength after notching a holiday quarter that resembled pre-pandemic levels. However, Disney’s movie business is still far from its peak performance. But this year could show a lot of improvement. Disney+ has done nothing but exceed expectations. But sentiment toward streaming is down because of Netflix‘s (NASDAQ: NFLX) concerning subscriber losses — which begs the question of when, Disney+ will reach profitability, if ever.

Investors considering Disney stock now can pick up shares 45% down from their all-time high, at a lower price than their pre-pandemic level, at a time when market optimism is low, and when recession fears are high. Moreover, Disney hasn’t proven its parks and movie business will be able to book new all-time-high profits, and Wall Street is essentially valuing Disney+ at next to nothing given the stock is lower now than before its launch.

Bears may think that Disney stock is at a tipping point, but the stock looks inexpensive for those who believe in the long-term growth of Disney’s business and the power of its brand. Instead of focusing solely on Disney+ and whether its growth slows or not, it may be better to focus on the parks, experiences, products, media networks, and studio entertainment segments. These are the real cash cows. If those segments are healthy, Disney can afford to make no money off Disney+ for a few years, which will give it time to build out the service so it can reach its potential.

Disney’s ace in the hole for 2022 isn’t a rebound in the parks business or better-than-expected Disney+ growth — although that would help. Rather, the ace in the hole is a reminder that Disney makes some of the world’s biggest box-office hits, that it will likely continue to do so for years to come, and that it purposely delayed the release of some of its biggest hits for 2022 in anticipation of a rebound in movie theater attendance. For that reason, Disney stock looks like a great value now.

Daniel Foelber has positions in Walt Disney and has the following options: long January 2024 $145 calls on Walt Disney, long July 2022 $145 calls on Walt Disney, long June 2022 $170 calls on Walt Disney, short January 2023 $140 calls on Walt Disney, short January 2024 $150 calls on Walt Disney, short July 2022 $150 calls on Walt Disney, short June 2022 $175 calls on Walt Disney, short November 2022 $120 calls on Walt Disney, short October 2022 $135 calls on Walt Disney, and short September 2022 $115 calls on Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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