With the opening of its new Cars Land expansion, Disney (NYSE:DIS) California Adventure park drew a large number of audience on the opening day of the new expansion. [1] The park has seen similar success with its World of Color expansion that revived its attendance in the post-recession period of 2010. [2] This shows the ability of the company to pull visitors given the right theme, appeal and engagement. However, in order to better understand the incremental benefit to Disney, we need to understand the value of its theme parks business and within that, the contribution of the California theme park.
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The Disney California Adventure park accounts for roughly 10% of Disney’s domestic theme parks attendance, and this figure stood at approximately 6.3 million in 2010. [2] In turn, domestic theme parks & hotel business accounts for less than 10% of Disney’s value, as per our estimates due to high capital expenditures and resulting lower cash profits.
Taking these two figures into account, the value contribution of Disney California Adventure park is minimal and, thus, the resulting benefit from one expansion to this park is not significant. However, Disney will need to keep coming up with such expansions over time in order to keep visitors interested.
Our price estimate for Disney stands at about $52, implying a premium of about 10% to the market price.
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Notes:- Disney California Adventure attendance breaks record, report says, Los Angeles Times, June 19 2012 [↩]
- 2010 Theme Index, The Global Attractions Attendance Report by Themed Entertainment Association [↩] [↩]
