UBS: Disney's Shanghai Disneyland is a major success

Disney stock price is up 8.35% so far this year, rebounding after a drop brought on by fears of the implications of cord cutting on Disney’s ESPN subsidiary. Disney shares are trading at $US112.82 as of 10:50 AM EST April 7.

But leaving aside from ESPN’s woes, another big part of the company is doing quite well.

UBS Global Equity Research partnered with the UBS Evidence Lab to evaluate the progress of Disney’s newest park, Shanghai Disneyland, in its first year. The team of analysts led by Doug Mitchelson found that Shanghai Disneyland is meeting or exceeding expectations and that theme parks will be a major contributor to Disney’s earnings growth going forward.

While many analysts are focused on Disney’s film cycle or ESPN problems, UBS thinks that Disney’s theme parks, in particular Shanghai Disneyland, will be the big determining factor behind Disney’s near-term earnings growth. The bank explains:

“We partnered with the UBS Evidence Lab to gauge the health of Shanghai Disneyland (“SDL”) as it progresses through its first year and found that the new theme park is tracking quite well. We expect that SDL will drive 29% of the EBIT growth for the Parks division from FY16-21 and that the Parks division, in turn, will drive 67% total DIS EBIT growth over that same timeframe.”

Evidence collected by UBS, including satellite photos of parking lot utilization and network traffic analysis measuring attraction wait times, points to a very strong opening year for the new park with UBS predicting 11.4 million visitors.

UBS approves of Disney’s continued investment in parks. Disney is about to put another $US7 billion into their parks including a new “Pandora” experience based on the 2009 hit movie “Avatar” and its upcoming sequels at Animal Kingdom in Florida. UBS thinks that investment in parks will add 10% to Disney earnings growth over the next decade.

In addition to “Pandora,” there are several other new attractions coming including “Toy Story,” “Frozen,” and “Star Wars” lands at various Disney parks:

The bank is reaffirming their “Buy” rating and $US130.00 price target on Disney.

Click here for a real-time Disney chart.

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