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The Avatar sequel's debut disappointed but patience may be key
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With the major equity indices attempting a recovery effort on Tuesday, shares of Disney (NYSE:DIS) managed to gain about 1%. Nevertheless, trading for DIS stock has been choppy as market participants digest core news items. In particular, the entertainment giant’s much-anticipated box office debut Avatar: The Way of Water delivered nominally sizable figures. However, the weekend tally disappointed against lofty expectations. Still, some patience may be required.
Domestically, The Way of Water — the sequel to famed director James Cameron’s 2009 megahit Avatar — brought in $134 million. While the haul delivered Cameron’s first nine-figure opening weekend per Yahoo Finance’s Alexandra Canal, it conspicuously missed analysts’ expectations. Running at a rather lengthy three hours and 12 minutes, the Avatar sequel represented the fifth-highest opener of 2022.
However, that was not good enough for stakeholders of DIS stock. Film experts anticipated that The Way of Water would bring in $175 million at the domestic box office. Per CNBC, Disney’s own forecast called for a count between $135 million and $150 million.
What particularly raised concerns was China. On paper, the international market truly came alive, posting $300.5 million. Indeed, Variety’s Rebecca Rubin described the global haul as “dazzling.” However, the Chinese box office rang up a weekend total of $57.1 million, well below hopes for a $100 million debut.
While the China shortfall clouded the narrative for DIS stock, it’s also important to remember the context. Beijing has been extremely aggressive with its policies for the coronavirus, implementing a draconian zero-Covid stance. Following sharp protests, the Chinese government began relaxing some of its measures. However, flare-ups of Covid-19 and subsequent theater closures stymied the opening-weekend performance.
“The problem is nobody wants to go to the cinema, because they’ve been told that COVID is extremely dangerous,” Tony Chambers, Disney’s global head of theatrical distribution, told the Wall Street Journal. “Although cinemas are open, the appetite for going to them isn’t really there.”
Nevertheless, as the WSJ pointed out, “Disney is hopeful the movie will benefit from a long period of high demand, as did the first ‘Avatar’ movie, both at home and abroad.” A key point, per Chambers, is that the sequel faces little big-blockbuster competition for the next few weeks.
CNBC noted that “[t]he original film, released in 2009, made just $77 million during its first weekend but went on to become the highest-grossing film of all time.” Therefore, movie analysts refuse to hit the panic button on DIS stock just yet.
Further, another CNBC article noted the immersive experience that moviegoers will enjoy with The Way of Water. Therefore, DIS stock may eventually benefit from positive word of mouth. As well, the unique cinematic experience augurs positively for Imax (NYSE:IMAX), which is geared to deliver unparalleled immersion.
Though the box office remains in a recovery mode from Covid-19, the big screen offers an excellent value proposition compared to other forms of entertainment, such as attending a high-profile professional sports game. Thus, some analysts hold out hope for DIS stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
Article printed from InvestorPlace Media, https://investorplace.com/2022/12/why-is-disney-dis-stock-trending-today/.
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