Walt Disney Co.(NYSE: DIS)stock has had a magical effect on investors' portfolios over the long term. It's returned 234% over the 10-year period through Oct. 12, more than twice the S&P 500's 96.4% total return.
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The entertainment giant's overall business has been performing wonderfully, although its cable business has some challenges centered around cord-cutting. However, this is a company that has successfully navigated numerous major changes in the consumer market landscape since its founding in 1923. So there's a strong argument to be made that the market's jitters over cord-cutting is handing long-term investors a buying opportunity.
Here are 10 reasons to buy Disney stock and never sell:
Image source: Disney.
1. Its powerful business model
Disney has an incredibly powerful business model, with its iconic movie-making business at its core. The company is masterful at turning one hit movies into a series of very profitable ones. Moreover, successful films are leveraged across its empire, providing big opportunities in merchandising, theme park attractions, streaming, live shows, and more.
2. Its top-notch techy chops
The House of Mouse can be considered as much a tech company as an entertainment company. While technology is not its end product, it prodigiously develops and uses technology to continuously improve upon its products and introduce new ones across its businesses.
The company was anearly leader in entertainment technology development with inventions like the multiplane camera and Fantasound. Disney Research is currently innovating within a wide range of technologies, including such "hot" ones as virtual reality, robotics, and 3D printing.
3. Star Wars is just warming up
Disney opened its fiscal year 2016 with the release of the megablockbuster Star Wars: The Force Awakenslast December. Audiences worldwide forked over nearly $2.1 billion at the box office to revel in the first new release from the iconic franchise in a decade, and the first ever release since Disney acquired Lucasfilm in 2012.
The good news is that Hans Solo and crew under Disney's ownership are just at the start of what should be a long and lucrative theatrical reign. Disney has five Star Warsmovies slated for release through 2020, beginning with the stand-alone firmRogue One on Dec. 16.
4. Pixar, Marvel, and Disney movie brands are firing on all cylinders
Disney's Star Wars franchise has received the most press, but each of its movie brands has been a powerful contributor to its studio entertainment business' robust performance in recent years.This chart of the top-grossing movies worldwide in 2016 reflects the degree to which Disney is dominating the world's silver screens:
Data source:Box Office Mojo;data last updated on Oct. 11 at 4:11 p.m. PT.
5. ESPN should remain a home-run hitter
ESPN has been at the heart of the market's unease about Disney's cable business' future profitability because it's the most lucrative of the company's channels. Its steady loss of subscribers -- stemming from the availability of streaming options resulting in consumers discontinuing or slimming their large cable bundles -- is potentially troublesome.
However, two facts combined point to ESPN remaining a golden property for Disney over the long term: Americans' love affair with sports is something that won't ever change, and ESPN is the world's most popular sports channel. There could be bumps in the road as Disney continues its nascent transitioning of how it brings ESPN to viewers, but the long-term picture should remain bright.
6. It could be a dominant streaming player
Disney's recently acquired 33% stake in video streaming leader BAMTech will allow it to bring its media brands directly to consumers. In fact, the entertainment giant plans to launch a direct-to-consumer ESPN-brandedmultisport subscription video streaming service later this year.
CEO Bob Iger has said the primary reason for the company's $1 billion investment in BAMTech is to ensure that its brands remain relevant in a changing TV-viewing market. The side benefit of this acquisition is that it should allow Disney to profit along with the rising popularity of streaming in general.
7. Its iconic theme parks will never go out of style
Disney's massive theme parks have offered visitors an unbeatable combination of nostalgia, fantasy, and futurism since the company opened the world's first modern theme park, Disneyland, in 1955. They've also brought Disney immense -- and very dependable -- profits.
The Mouse'sparks dominate the theme/amusement park market, as this chart shows:
Data source: Wikipedia.
Disney's stranglehold on the industry is further illustrated by the fact that it owns eight of the top-10 most visited parks in the world.There's no reason to believe that consumers won't continue to find Disney's parks the most magical places on Earth.
8. Its Chinese invasion has just begun
CEO Bob Iger rattled off some statistics during the company's last earnings callquantifying Shanghai Disney's success since its opening on June 16 (through the date of the call on Aug. 9):
- More than 70 million people in China watched the opening ceremony live on television or via digital streaming.
- More than 1 million guests visited the park since its opening.
- Hotel occupancy rate is holding steady at 95%.
Disney's massive $5 billion park -- its first in mainland China -- should act as a goodwill ambassador of sorts. If folks in China enjoy their visits to the park, they're sure to clamor for other Disney offerings. China presents immense potential for Disney because the most populous country in the world has a ballooning middle class.
9. It's a player in virtual reality
There's nearly universal agreement that the burgeoning virtual reality (VR) market is going to be humongous. That's why all the big tech companies from Facebook to Alphabetto Sony have been entering this space over the last several years.
Perhaps not surprisingly, Disney was one of the original pioneers in VR, as Disney Imagineering began exploring the tech in the late 1980s and never stopped. This is the group that designs and builds the company's theme parks, resorts, cruise ships, and other entertainment venues.
Disney upped its involvement in VR last September when it led a $66 million investment round in cinematic VR player Jaunt, bringing its total funding to $100 million and making it the most funded VR start-up ever. This is a partnership to watch.
10. Its compelling stock valuation
Disney's stock trades at a reasonable 16.5 times earnings, whereas it traded for more than 21 times earnings a year ago -- and the company's financial performance over the last year has been better than it was a year ago. Moreover, Disney's free cash flow is strong, with the stock's price-FCF ratio at 19.5, a level it's not seen since late 2013.
A final word
While Iger is set to retire as chairman and CEO at the end of June 2018, it's certainly possible he could postpone his exit again if more time is needed to identify and groom a successor. Investors should be confident that Disney's strong board, with input from Iger, will make a solid choice for the next CEO.
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Beth McKenna has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. 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.