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Great news for Disney! dr Strange is bringing it to theaters

The Walt Disney Company (DIS -1.11%) was devastated at the start of the pandemic. Several of its sources of income depend on bringing large groups of people together in person. In particular, The House of Mouse regularly occupies a dominant position at the box office. In fact, Disney’s films have been topping the charts for decades.

However, government-ordered cinema closures have forced Disney to launch films directly on its streaming service or delay launches altogether. Thankfully, business restrictions have eased and people are returning to theaters, and that’s helped Disney’s latest release. dr strange in the multiverse of madness, deliver fantastic results.

A group of people in a cinema.

Image source: Getty Images.

success at the theaters WONDER-ous

Since its widespread publication, the dr Strange The sequel has grossed $690 million in box office earnings in its first few weeks. Typically studios like Disney and cinema chains like AMC Entertainment Group will negotiate a pay close to 50/50. If Disney negotiated a similar price for this latest film, it would gross around $350 million.

That’s excellent news for The House of Mouse, which made $4.7 billion in box office receipts in fiscal 2019 and $4.3 billion in box office receipts in 2018. The loss of theatrical distribution revenue due to the pandemic was a significant blow to Disney’s business. The loss was overshadowed by the larger losses the company incurred from the closure of its theme parks, but was still massive. The Studio Entertainment segment generates additional revenue from sales through home entertainment channels such as Blu-ray discs and streaming rentals. Overall, the segment, which relies on successful theatrical releases, generated operating revenues of US$2.7 billion and US$3 billion in 2019 and 2018, respectively.

Chart of DIS Operating Revenue (Quarterly).

DIS Operating Income (Quarterly) data from YCharts.

In addition, the film generated a lot of publicity for Disney and the Marvel franchise. In a few weeks it will be dr Strange Movie is coming to Disney+. That anticipation, and eventual availability, could boost Disney+ subscriptions. Disney’s flagship service already has 138 million subscribers, and the addition of hit films will likely build on that momentum.

Disney has a robust list of potential blockbusters launching by the end of this year, including a toy story origin story, Thor: Love and Thundera continuation of the enormous success avatar, and more. As a result, Disney investors have a lot to look forward to from this segment this year.

What this could mean for Disney investors

DIS horsepower ratio chart

DIS PS Ratio data from YCharts.

The results from the dr Strange The film is evidence of another step forward for Disney in its recovery from the pandemic. Of course, Disney is far from at full strength, and the pandemic is far from over. However, Disney stock is trading at a price-to-sales multiple of 2.6, near the bottom it hit at the start of the pandemic, when so many of its lucrative operations were forced to close because of uncertainty about when they would reopen would.

Investors can add Disney to their list of stocks to buy and then use any price declines as buying opportunities. Once Disney returns to full strength, the stock could be a lot higher, and investors may have missed an excellent opportunity to buy an iconic company at a bargain price.

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