Disney: Strengths, Weaknesses, Opportunities, and Threats

Ryan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. Fresh off their recent $4 billion acquisition of Lucasfilms, I would like to pinpoint the owner of the proclaimed “happiest place on Earth”, The Walt Disney Company (NYSE: DIS).

Strengths:

  • Disney’s collection of brands includes some of the most globally-recognized and durable names: Disney, ESPN, ABC, Pixar, Marvel, and now, Lucasfilms
  • Disney has proven over and over again that it is able to make profitable and smart investments to boost growth, as its Marvel brand has already produced Iron Man, Thor, Captain America, and the Avengers, and Pixar consistently produces blockbuster hits
  • The financial growth of the company remains solid even through financially stagnant times, with the rate being in the high single digits for the past years in the sales department, this trend is projected to continue into the future
  • The company pays out an annual dividend of $0.60, which at current prices puts the dividend as yielding 1.20%
  • The company is heavily diversified, operating in five segments: media networks, studio entertainment, interactive media, parks and resorts, and consumer products, and is an established giant, worth $89.46 billion on the market

Weaknesses:

  • The company operates in some of the highly competitive markets in the world, with numerous other companies producing the same products, (Universal Orlando to their Disney World) (Dreamworks to their Pixar)
  • The company derives the large majority of its revenue from the volatile and unpredictable child market, as one day the world’s kids might like one thing and next another character or story
  • The company’s success is highly linked to the overall economic condition as their products are the complete opposite of necessities, in times of despair people are noting going to have the money to go on a vacation or buy gifts at the Disney Store
  • The markets they operate in have no guarantee of success, there is no guarantee that the movies are going to be blockbusters or that a new line of characters will prosper, and many times the company pours millions into development or production
  • The Disney brand receives immense amounts of respect because of their track record, and this often times drives sales as consumers know Disney is a quality brand, however any slipup could dent the golden Mickey image

Opportunities:

  • The company recently announced its acquisition of Lucasfilms, for 2 billion in stock and 2 billion in cash, which includes the iconic Star Wars and Indiana Jones franchises
  • Disney has expressed plans to produce episode 7, 8, and 9 of Star Wars, with the first being planned for release in 2015, and this acquisition could prove to pay massive dividends in the future as the iconic brands of Lucisfilms are revived
  • Additional acquisitions are always a possibility, as Disney has continuously proven in the past that they are willing to pay out large amounts of money to acquire its targets
  • With the track record the company possesses of producing blockbuster hits and resulting valuable brand lines, it is always a possibility that in the future they could duplicate this success

Threats:

  • In every market Disney operates in, there is heavy competition, and the resulting race for the consumer’s dollar leads to the squeezing of margins
  • While the company’s acquisition of Lucasfilms looks promising, investing 4 billion in something which they do not plan to derive any revenue from until 2015 is a risky investment, as it is always a possibility that consumers will simply be sick of Star Wars
  • A major threat to Disney’s success is the current market stagnation, as consumers do not have money to spend on Disney’s products and vacations

Competitors:

Major publically-traded competitors of Disney include Viacom (NASDAQ: VIAB) and Time Warner (NYSE: TWX). Viacom competes most directly with Disney in the television and motion picture arenas. Viacom’s Nickelodeon is Disney’s main rival as they both battle for the attention of the all-important child eye. Viacom, in the view of many, is the most threatening company to Disney’s success. Time Warner also competes with Disney in the television network industry. Time Warner’s HBO network competes with Disney’s networks for the attention of the consumer.

Conclusion:

Disney possesses many strengths, weaknesses, opportunities, and threats, however in the end appears to a financially solid company with an upbeat future. On any market pullback, this company appears extremely attractive, and is tremendous long-term investment.     


makinmoney2424 has no positions in the stocks mentioned above. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services recommend Walt Disney and Time Warner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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