Disney's Shanghai Theme Park On The Verge Of Making Profit

There is no denying the fact that a strong performance by the Parks & Resorts and movie businesses has been the primary growth driver for The Walt Disney Company (NYSE:DIS) , amid a situation where its primary cash cow, ESPN, has been under immense pressure. The recent news about Disney’s Shanghai theme park indicates that its Parks & Resorts business remains a profitable venture.

Per Bloomberg, Disney’s CEO Iger stated that the Shanghai theme park is on the verge of reaching break-even point following its first full year of operations. In the past 30 years, none of the Parks & Resorts have managed get close to break-even point after its first full year of operations.

In Jun 2016, the $5.5 billion Shanghai Disney Resort, The Walt Disney Company’s second-largest theme park and its first in Mainland China opened doors.The theme park managed to draw over 11 million visitors in the first year, surpassing the company’s and the analyst expectations. The Shanghai theme park also managed to beat the likes of Hong Kong and Paris Disney theme park but fell behind Tokyo Disneyland and Magic Kingdom in Orlando, FL. In 2016, both Tokyo Disneyland and Magic Kingdom attracted 16.5 million and 20 million viewers, respectively.

Disney is focused on deploying its capital toward expansion of the Parks and Resorts business, thereby increasing market share and creating long-term growth opportunities. The company has high hopes for the Shanghai resort.

In second-quarter fiscal 2017, the Parks & Resorts segment reported revenues of $4,299 million, up 9% from the year-ago period. The segment’s operating income climbed 20% to $750 million, backed by opening of Shanghai Disney Resort in third-quarter fiscal 2016, and also due to robust performance of domestic parks and resorts. Growth at domestic operations was driven by increase in guest spending, and attendance.

Disney, which carries a Zacks Rank #3 (Hold), shares space with Twenty-First Century Fox, Inc. (NASDAQ:FOXA) . In the past three months, the company’s shares have declined 6.4%, in line with the Zacks categorized Media Conglomerates industry.

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