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Disney’s Track Record of Successful Acquisitions
Disney has a long history of making strategic acquisitions that have propelled the company forward. One of the most notable examples is the acquisition of Marvel Entertainment and Lucasfilm.
Between these two deals, Disney spent approximately $8.5 billion. Although this might seem like a lot of money, consider that these two properties provided Disney an opportunity to expand the Marvel Cinematic Universe (MCU) and Star Wars franchise exponentially — from several blockbuster films, new items and rides at theme parks, merchandise, and spin-off shows on Disney+.
The entire rationale of acquiring Marvel and Lucasfilm wasn’t just to own the rights to these franchises. Rather, by marrying beloved characters with Disney’s unparalleled creative horsepower, the company was essentially able to reinvent itself by expanding upon two of the most famous media properties of all time.
In a sense, Disney created a cycle by which owning these franchises served as a catalyst that helped fuel new waves of growth across the company’s entire business — well beyond its legacy film operation.
The Case for Disney Acquiring Build-A-Bear Workshop
I believe Disney has the opportunity to replicate its successful acquisition blueprint once again with Build-A-Bear Workshop. Build-A-Bear is a retail business where consumers create a plush, stuffed animal from scratch.
Generally, Build-A-Bear locations are in malls, and sometimes satellite locations can be found inside of sports stadiums. I think Build-A-Bear offers Disney a new way to engage with consumers and drive loyalty.
Interactive Experience and IP Portfolio
Build-A-Bear’s interactive experience is a unique way for Disney to bring its storytelling to a new level by leveraging its intellectual property (IP) portfolio and introducing an entire new line of characters to the Build-A-Bear lineup.
This could include partnering with popular Disney franchises such as Frozen, Toy Story, or even Marvel to create exclusive Build-A-Bear characters.
Theme Park and Movie Businesses
Going to Disney World or even the movies nowadays is increasingly expensive — especially for families. Build-A-Bear offers a more inclusive entry point for consumers with regards to pricing.
Families could enjoy a fun, interactive experience at Build-A-Bear without breaking the bank, making it an attractive addition to Disney’s portfolio.
Distribution Channels and Merchandise
Build-A-Bear’s brick-and-mortar retail footprint provides Disney with additional distribution channels outside of digital.
Disney could easily cross-promote new movies or series on Disney+ at Build-A-Bear locations, driving engagement and revenue.
Furthermore, acquiring Build-a-Bear gives Disney a chance to strengthen its merchandise vertical. The obvious opportunity here would be to enhance product revenue through the retail of exclusive Build-A-Bear characters and accessories.
Valuation and Market Performance
As we evaluate the potential acquisition of Build-A-Bear Workshop, it’s essential to consider the company’s current market performance and valuation.
A simple valuation approach can be used to estimate the potential value of Build-A-Bear. Using the market capitalization divided by future annual revenue, we can get an estimate of the company’s valuation.
In this case, since L’Oreal is a French company, it was challenging to find their outlook revenue, so we went with TTM (Trailing Twelve Months). And L’Oreal is such a large conglomerate, they sell so many different products, including cosmetics, so not sure if it’s even relevant anyway, but it’s included in the data below.
Clearly, ELF is priced like a market leader:
- e.l.f. Beauty: Poised To Gain Market Share Leading To Further Upside. (NYSE:ELF) | Seeking Alpha
The upshot of the article is that ELF is oversold, and an argument is made that a reasonable valuation is $200/share perhaps in 2025.
Using a simple valuation approach, let’s estimate ’25 revenue and see what we find.
In FY24, ELF is forecasted to see 70% revenue growth YoY, but projections suggest a slowdown in growth for FY25, expected to be in the high twenties range. So just going with 25% growth, we get the following:
So using my simple valuation model also gets us in the $200 range, in 2025.
Conclusion
In conclusion, the article “Prediction: Disney Will Beat the Market. Here’s Why.” presents a compelling case for why The Walt Disney Company is poised to outperform the market. The main arguments discussed in the article center around Disney’s diversified revenue streams, its extensive library of iconic characters and franchises, and its strategic expansion into emerging markets and new technologies. The company’s successful foray into streaming services with Disney+, its dominance in the film industry with box-office hits like Marvel and Star Wars, and its significant presence in the theme park and resort industry all contribute to its impressive growth potential. Additionally, Disney’s commitment to innovation, its strong brand recognition, and its ability to adapt to changing consumer preferences further reinforce its position as a market leader.
The significance and implications of this topic cannot be overstated. As one of the most recognizable and beloved brands worldwide, Disney’s performance has a profound impact on the entertainment industry, the global economy, and popular culture as a whole. The company’s continued success is likely to have far-reaching implications, from influencing the way we consume media and entertainment to shaping the future of the tourism and hospitality industries. Moreover, Disney’s strategic moves and innovations can be expected to inspire and drive competition, leading to further growth and innovation in the entertainment sector. As we look to the future, it will be fascinating to see how Disney navigates the ever-evolving landscape of the entertainment industry and how it leverages its strengths to capitalize on new opportunities and mitigate emerging challenges.
As we gaze into the crystal ball, it is clear that Disney is poised to remain a dominant force in the entertainment industry for years to come. With its unrivaled portfolio of iconic characters, its impressive slate of upcoming film releases, and its aggressive expansion into emerging markets and technologies, the company is well-positioned to drive growth, create value, and entertain audiences worldwide. In the end, one thing is certain: as Disney continues to push the boundaries of innovation and imagination, one question will remain on everyone’s mind – what’s next for the House of Mouse? The answer, much like Disney itself, will likely be nothing short of magical, leaving us all to ponder: can anyone really catch up to the leader of the club?