'Avengers: Endgame' marks a new beginning for Disney stock

Marvel Studios

  • “Avengers: Endgame” is forecast to be the highest-grossing movie in history, and stock analysts think it could help to push Disney shares higher.
  • The latest Marvel movie is slated to take $US280 million on its opening weekend, and potentially generate $US2 billion in worldwide box-office revenue .
  • “Avengers: Endgame” marks the end of Phase 3 of the Marvel Cinematic Universe, but Disney has a strong release slate this year, and can maintain fan interest by introducing the X-Men and Fantastic Four to the MCU.
  • Bank of America Merrill Lynch analyst Jessica Reif Ehrlich argued Disney’s stock is “more than just an endgame” and pointed to other drivers such as its upcoming Disney+ streaming service and $US2 billion in cost savings from its takeover of 21st Century Fox.
  • Watch Disney trade live.

“Avengers: Endgame” is shaping up to be the highest-grossing movie in history. Stock analysts think the superhero epic could help to push Disney shares higher.

Captain America, Iron Man, and Thor’s latest outing has already scored the biggest box-office opening ever in China and sold five times as many pre-sale tickets as its prequel, “Avengers: Infinity War”. The movie is slated to rack up $US280 million in ticket sales in its opening weekend, and go on to generate $US800 million at the US box office and north of $US2 billion worldwide.

Marvel cinematic universe worldwide box office chart endgame projectionShayanne Gal/Business Insider

Heady demand for tickets sent AMC Theatres stock up 11% earlier this month, according to CNBC, and the cinema chain plans to keep 17 theatres open for 72 hours straight this weekend. The buying frenzy crashed the websites of the three major UK cinema chains – Cineworld, Odeon, and Vue – earlier this week, according to iNews.

“Avengers: Endgame” excitement has spread to toy stores too. Hasbro CEO Brian Goldner reported “very strong” sales of movie-related merchandise such as Mega Mighties action figures on the toymaker’s first-quarter earnings call. He expects Disney-owned Marvel and The Avengers to have “a very big year.”

A $US200 million marketing campaign, according to Deadline, has seen Earth’s mightiest heroes appear in Geico and Audi commercials and their weapons featured in Fortnite. The movie is also earning rave reviews: it currently has a critic score of 97% on Rotten Tomatoes and an IMDB rating of 9.2/10.

“Avengers: Endgame” is the “next catalyst” for Disney stock, according to David Miller, an analyst at Imperial Capital. He forecasts a $US275 million opening weekend and worldwide gross of $US2.15 billion.

The movie is the first release of a “very robust film slate” for Disney that includes “Aladdin,” “Toy Story 4,” “The Lion King,” “Frozen 2,” and “Star Wars: Episode IX,” said Goldman Sachs analyst Drew Borst in a research note. However, it’s also the final film of Phase 3 of the Marvel Cinematic Universe (MCU) – the shared world that Marvel’s big-screen heroes live in.

“Some investors worry that after ‘Avengers: Endgame’ … Disney may struggle to maintain Marvel’s popularity and box office success,” Borst said.

“While franchise fatigue is always a risk…we believe Marvel is more insulated from this risk due to the MCU strategy.”

Movies in the MCU have grown in popularity since the first “Iron Man” film in 2008, as overseas interest in the franchise has risen. Disney can maintain that momentum by expanding the MCU: it secured the rights to the X-Men and Fantastic Four with its recent takeover of 21st Century Fox. Including those characters will open up “new creative opportunities, interconnected film storylines, and ultimately more box office,” Borst predicted.

He cautioned that Disney’s studio business faces a tough comparative period this year. “Black Panther,” “Avengers: Infinity War” and two Star Wars movies were all released in the 12 months to September 2018. However, Disney can continue to capitalise on those movies’ success by featuring their characters in TV shows, musicals, video games, t-shirts, and theme parks.

In a research note titled “More than just an endgame,” Bank of America Merrill Lynch analyst Jessica Reif Ehrlich pointed to “Avengers: Endgame” and the rest of Disney’s “solid studio slate” as a driver of its stock.

She also expects strong subscriber demand for Hulu, ESPN+ and the upcoming Disney+ streaming service, growth in Disney’s theme parks and consumer products division, a stable showing from its media networks, potentially $US2 billion in cost savings from the Fox deal, and share repurchases to push its shares higher.

Others aren’t as bullish about the MCU’s latest instalment.

“We don’t see record pre-sales for “Avengers: Endgame” as a catalyst, as we think this type of early performance is expected of the final chapter of the current Avengers arc,” said Daniel Salmon, an analyst at BMO Capital Markets, in a research note.

Paying the salaries of the large Hollywood cast of “Avengers: Infinity War” ate into the movie’s bottom line, Salmon said. He expects that to be true for its successor too.

Disney’s stock has risen by a quarter since the start of 2019. The company is scheduled to report second-quarter earnings on May 8.

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