Disney (NYSE:DIS) plans to invest significantly in its parks and resorts in order to improve guest attendance. We estimate that parks and resorts account for about 15% of the $37 Trefis price estimate for Disney’s stock.
Disney’s capital expenditure for its parks and resorts was $1.2 billion in 2009, representing around 67% of Disney’s total capital expenditure (excluding Marvel).
We expect Disney’s capital expenditure to continue to rise further in 2011 and this may lead to a potential downside to its stock if the capital expenditures fail to drive additional guest attendance at Disney parks, resorts and cruise ships.
Spending on Hawaii and Cruise Ships
Disney has plans to open its new Aulani resort in Hawaii in late 2011 and is building two new cruise ships, one of which will be active in 2011. About 40% of the capital expenditures for building these ships is expected to materialize in 2011.
We expect capital expenditures (as % of EBITDA) for Disney’s domestic parks resorts business to rise from 40% to 45% by end of 2011, and gradually decline thereafter till the end of Trefis forecast period. You can modify the forecast below to see how Disney’s stock price could be impacted if higher levels of capital expenditure for the Parks & Resorts division were to persist across our forecast period.
We expect that the construction of new Disney resorts and cruise ships will bring in additional profits beyond 2011 as a result of higher guest attendance. However, there could be additional downside to our estimate for Disney’s stock if guest attendance were not to increase as much as expected.
For additional analysis and forecasts, here is our complete model for Disney’s stock.
