Anticipated Declaration: My Strong Assurance Regarding Disney's Trajectory in 2025
Anticipated Declaration: My Strong Assurance Regarding Disney's Trajectory in 2025
The entertainment sector has consistently proven to be challenging to maneuver, regardless of whether you're a prominent figure in Hollywood or a celebrated athlete. This industry generally functions based on the principle of "what have you done lately?".
However, one organization that continues to challenge these expectations is The Walt Disney Company (DIS). For a century, Disney has captivated audiences worldwide like no other entity, thanks to its unrivaled ensemble of iconic characters, endless universes filled with enchantment, and stories that enthrall individuals of all ages.
Despite encountering some turbulence recently, Disney has displayed remarkable resilience. Over the past couple of years, Disney has been embroiled in a fierce battle with activist investor Nelson Peltz. Moreover, the company has faced escalating competition in the streaming field, primarily from Netflix, and a challenging environment in the movie industry and theme parks due to a writers strike and a challenging economic climate.
As Disney continues to navigate these challenges, it would be wise to identify new avenues of growth. Below, I will divulge my audacious prediction about Disney's potential next significant stride as 2025 approaches. Let's delve into the details!
I believe Disney should pursue an acquisition
Disney has a storied history of making acquisitions. In recent years, some of Disney's most noteworthy acquisitions include Marvel Entertainment and Lucasfilm. These two acquisitions amounted to approximately $8.5 billion.
Although this may seem like a substantial sum, consider the opportunities these two properties provided Disney to broaden the Marvel Cinematic Universe (MCU) and the Star Wars franchise. Disney expanded the MCU and Star Wars franchise through blockbuster films, new attractions at theme parks, merchandise, and spin-off shows on Disney+.
The objective of these acquisitions was not simply to secure the rights to these franchises. Instead, by melding beloved characters with Disney's exemplary creative prowess, the company effectively rejuvenated itself by expanding upon two of the most renowned media properties of all time. Essentially, Disney created a self-sustaining cycle in which owning these franchises propelled new waves of growth across the entire enterprise, beyond its traditional film division.
In my view, Disney has another opportunity to replicate this blueprint. Below, I will elucidate why I believe Disney should acquire Build-A-Bear Workshop.
Why I envision Disney and Build-A-Bear as a harmonious union
Build-A-Bear Workshop is a retail establishment where consumers craft their own stuffed animals from scratch. Build-A-Bear locations are primarily found in malls, with satellite locations sometimes setting up shop inside sports stadiums.
I believe Build-A-Bear presents Disney with a novel approach to engage with customers and cultivate loyalty. Build-A-Bear's interactive experience offers Disney an opportunity to elevate its storytelling through its IP portfolio and introduce an entirely new line of characters to the Build-A-Bear collection.
Another compelling argument for Disney to acquire Build-A-Bear is related to Disney's theme park and movie businesses. Concurrently, attending Disney World or even the movies has become increasingly pricey – particularly for families.
By acquiring Build-A-Bear, Disney gains an accessible entrance point for consumers, as Build-A-Bear offers more affordable options. Furthermore, Build-A-Bear's brick-and-mortar retail network provides Disney with additional distribution channels beyond digital. In turn, Disney could easily promote new movies or series on Disney+ in Build-A-Bear locations.
Acquiring Build-A-Bear also offers Disney an opportunity to fortify its merchandise vertical. The obvious potential here is to boost product revenue through the introduction of new products tied to anticipated film releases, thereby creating another marketing and buzz-building vehicle before a movie debuts.
Is the deal feasible?
Disney's recent investments have been in the streaming platform Hulu and the gaming company Epic Games. While I welcome Disney's efforts to diversify, I contend that the streaming landscape is only set to intensify, thanks to the involvement of tech giants like Apple, Amazon, and Alphabet. The gaming landscape, too, seems pretty saturated, and I question if an investment in Epic Games will yield significant long-term value.
I articulate this as Disney's focus should remain on connecting with audiences through compelling storytelling, which has been its strength since inception.
As of the time of this article, Build-A-Bear stock is trading at $44, nearing all-time highs. Although this might appear expensive, consider that the company's market cap is just $585 million.
In contrast, Disney's market cap is well over $200 billion. Furthermore, Disney's balance sheet showed $6 billion in cash and equivalents as of the company's full-year fiscal 2024 (ended Sept. 28) earnings report.
In essence, if Disney wanted to acquire Build-A-Bear, it could comfortably do so while paying a generous premium and complete the entire transaction using its available cash reserves. To me, this is yet another reason for this deal to materialize.
In light of Disney's history of acquisition-driven growth, such as its purchase of Marvel Entertainment and Lucasfilm, it would make sense for the company to consider investing in another promising property. With an affordable asking price and potential for cross-promotion across Disney's various platforms, Build-A-Bear Workshop could be an attractive acquisition target for Disney, providing an opportunity to Engage with customers, enhance storytelling, and expand its merchandise offerings.
Given Disney's substantial financial resources, acquiring Build-A-Bear Workshop could be a strategic move to diversify its offerings and maintain its competitive edge in the entertainment industry. With its vast financial reserves and a manageable acquisition cost, Disney has the means to expand its portfolio and continue its impressive growth trajectory.