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Can Walt Disney Really Hit US$100bn Revenue by 2024?

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The post was originally published here.

Highlights:

  • Over the past 9 years, Disney saw a 5% CAGR revenue growth
  • Streaming platform Disney+ comprises new growth engine
  • Fast recovery of theme parks could drive revenue rebound

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How Walt Disney actually makes money

Overview of revenue over past 3-years

  • Media and Entrainment remains main revenue contributor
  • Park & Experience segment was heavily impacted by the pandemic

Disney’s revenue continuously increased, but not exploded

  • In the past 9 years, revenue grew at a solid CAGR of 5.3%
  • The company survived the pandemic well thanks to its new streaming platform Disney+
    • Revenue from streaming subscriptions partly offset the severe drop from its Park and Experience segment

But, past growth would not be enough to achieve US$100bn revenue

  • If we were to assume that Disney continues its stable growth rate of 5.3%, then we would end up at US$79 revenue in 2024
    • If we were to assume that Disney continues its stable growth rate of 5.3%, then we would end up at US$79 revenue in 2024

However, analyst consensus expect much higher growth

  • Analysts expects Disney revenue to grow at 14.8% CAGR over the next 3 years
    • This would result in US$102m revenue by 2024

Revenue forecast for Disney

  • Rising costs for affiliate content and advertising should benefit Disney’s top revenue contributor
  • Theater licensing could see a strong rebound as pandemic measures are lifted

Streaming platform Disney+ could be the main growth engine

  • Within 2 years, Disney+ contributed US$12bn in revenue, which is around 40% of Netflix’s revenue
  • As a comparison, Netflix started streaming services in 2007 and needed 10 years to get to US12bn in sales

Business model relies on economies of scale

  • To increase revenue, streaming providers must focus on increasing quantity
    • Given the intense competition, it is difficult to raise prices
  • As of 2021, Netflix has over 200m subscribers compared to Disney + with 118m

Let’s assume Disney can grow to Netflix level in 3 years

  • Disney+ would need to add another 100m subscribers in 3 years
  • If the company can do so, it could generate around US$30bn in annual revenue

How I incorporate the story into my forecast

  • Its streaming platform Disney+ is the main growth driver
  • Reaching 220m subscribers by 2024 does not seem unrealistic

Parks and Experience segment could see a strong rebound

  • In total, the company operates 12 amusement parks under the Disneyland brand
    • Florida, California, Tokyo, Hong Kong, Shanghai, and Paris
  • In 2021, it reopened all locations
    • Only Chinese locations face frequent temporary shutdowns
    • This could delay full recovery

Revenue forecast

  • Within 3 years from now, this segment should have recovered fully from COVID-19 shock

  • The company could indeed reach US$100bn revenue in 2024

Conclusions

  • We imposed two main assumptions
    • Full recovery of amusement parks, hotels, and merchandise revenue by 2024
    • Disney+ reaches more than 200m subscribers  by 2024 which is roughly equivalent to current Netflix subscribers
  • Under these assumptions, the US$100bn mark is possible

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.

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