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The Walt Disney Company (DIS): This High-Quality Company Is Firing on All Cylinders

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Monsters University is off to a very strong start after taking in more than $82 million in its opening weekend. This is great news for The Walt Disney Company (NYSE:DIS) investors, not just because of what it means financially but, more importantly, because it shows that the company hasn´t lost any of its magic when it comes to consistently creating widely successful content.

This wonderful story is far from over, and The Walt Disney Company (NYSE:DIS) still offers plenty of growth opportunities for investors in the long term.

A unique company

The Walt Disney Company (NYSE:DIS)

The Walt Disney Company (NYSE:DIS) is a unique business in several ways. To begin with, the company benefits from its tremendously valuable intellectual property, which sets it apart from the competition. Disney owns brands like ABC, ESPN, and Pixar among others, and it has the rights to profit from an amazing portfolio of fictional characters, from Mickey Mouse to Darth Vader, going through many of the most popular and recognizable names in the industry.

The company has a diversified business model that makes it very different from its competitors. The Walt Disney Company (NYSE:DIS) has the chance to monetize its characters and franchises across multiple platforms: movies, shows, home videos, theme parks, merchandising etc. This provides a lot of leverage when it comes to making money from its properties, and it´s an unparalleled advantage in the media and entertainment industry.

ESPN brings in nearly 75% of cable network sales via affiliate fees and advertising, and the leading sports network in the world benefits from indisputable competitive strength. It would be tremendously difficult for competing networks to replicate the expensive long term contracts ESPN has signed with major sports leagues and associations around the planet, so this cash cow is a distinctive strategic asset for The Walt Disney Company (NYSE:DIS).

Parks and resorts are not only a big and profitable business, but also a powerful venue to cultivate the lifelong relationship Disney has with its customers, both kids and their parents. Customer experience at the parks is full of those small but important details, which can make all the difference in the world, especially when it comes to the emotional connection people build with a brand.

When a little girl goes to the parks dressed like a princess, like many of them usually do, security guards – the real security guards, not actors – sometimes ask them for autographs saying something along the lines of, “Excuse me, Princess, can I have your autograph?”

Needless to say, this is a delightful scene to watch, and it’s the kind of thing that can be very effective in terms of ensuring customer loyalty in the long term.

Growth prospects

Disney has made a series of important acquisitions over the last years, including the purchase of Pixar for $7.4 billion in 2006, Marvel for $4.24 billion in 2009, and Lucasfilm and the Star Wars franchise for $4.05 billion in 2012. Considering that the company has an unparalleled ability when it comes to monetizing its catalog of characters, these acquisitions bode well in terms of growth prospects in the middle-term.

Competition is always a risk to watch, and new technologies like online video streaming mean that Disney will need to adapt to changing industry dynamics. Streaming is clearly the future of home video consumption, and this could negatively affect the company´s profitability, especially in movie sales.

The good news for Disney and other content producers is that Netflix, Inc. (NASDAQ:NFLX) and, Inc. (NASDAQ:AMZN) are immersed in an intense bidding war for content, and this is quite helpful when it comes to negotiating juicy conditions for their content streaming deals.

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