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By Neil Macker, CFA | 10-06-2015 12:00 AM

Disney's 3 Growth Fairy Godmothers

The House of Mouse should continue to generate long-term growth from ESPN, Star Wars, and its new Shanghai resort.

Neil Macker: Walt Disney Company (DIS) is a wide-moat stock with a fair value estimate of $134. We've recently added the stock to our Best Ideas list, as the stock is currently trading in 4-star territory. Today, we'd like to discuss three long-term drivers of growth for the company.

We believe that ESPN will continue to be a long-term driver for the company, despite recent worries about subscriber declines. The subscriber declines that Disney disclosed are in line with those projected by both Time Warner (TWX) and Discovery (DISCA)/(DISCB). We also note that the company receives affiliate fee increases annually of about 5%, more than offsetting any potential loss of revenue from subscriber declines.

We see the second driver of growth for the company coming from the release of the new Star Wars film, The Force Awakens, in December. The company has four more films expected to be released by 2019. Currently, the consumer demand for the movie tie-in products has been very high, showing pent-up demand for the series. We project that this movie will easily surpass $1.5 billion in global box office with the potential to almost hit $2 billion, setting up the final four films for success.

The third driver of growth for the company is the opening of the Shanghai resort in spring of 2016. We believe that the company will use the resort to strengthen awareness among Chinese consumers of its newer characters while bolstering the relationship with older characters. We project that the company will avoid the messes of Euro Disney and open seamlessly in comparison. The possibility also exists for the company to open more resorts in China, given the size of the market and the potential consumer demand.

With the recent pullback in Disney share price, we believe now is an attractive time to invest in a high-quality wide-moat name.

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