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May the 4th Be With You: How Star Wars Impacts Disney (DIS) Stock

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Today is May 4, and every year on this day, lovers of puns and Star Wars geeks celebrate their fandom. Yes, today is “May the Fourth Be With You”—and fans of the iconic movie franchise have declared it a galactic holiday.

When George Lucas released the first Star Wars film in 1977, the movie quickly became a smash hit. By the time the original trilogy wrapped up with Return of the Jedi in 1983, Star Wars was perhaps the most beloved series in film history.

Sure, the prequel trilogy wasn’t entirely well received, but Star Wars is more than just a series of movies. It is its own culture. It is its own universe. And throughout the world, it has inspired countless millions of people.

So when The Walt Disney Company (DIS - Free Report) bought Lucasfilm, the studio behind Star Wars, it was a huge deal. Disney shelled out about $2.21 billion in cash and $1.85 billion in stock for the company, and along with the purchase came plans to release a new Star Wars trilogy and multiple spinoff films.

Of course, the story for Disney investors back in 2012 was much different than it is now—what was once the bedrock of the “buy and hold” investment philosophy is now a company in a unique state of transition.

For years, Disney’s massive media portfolio and globally recognized brand was enough to consistently deliver impressive value to shareholders. However, a huge change in consumer behavior within the cable television industry has made Disney’s growth prospects more challenging.

Over the past couple of years, investors have become increasingly hesitant about Disney thanks to subscriber losses attributable to its ESPN and ABC channels.

But at the same time that Disney’s cable woes have increased, the company has also put out two new Star Wars films, both of which were massive successes at the box office.

So how has Star Wars helped Disney?

Well, The Force Awakens did about $2.1 billion at the international box office on a $300 million budget. Rogue One was also a hit—doing about $1 billion in sales on a $200 million budget. In short, both of these films were profitable for Disney, and that’s not to mention the merchandise and accessory sales associated with the massively-popular franchise.

However, studio films are just a fraction of Disney’s total revenue. In its latest earnings report, Disney reported total revenue of $14.8 billion, but just $2.5 billion of that came from studio entertainment—and this fiscal quarter included the release of Rogue One.

In short, the Lucasfilm acquisition was absolutely a winner for Disney, and it looks like the company has already made its money back on the purchase. But is Star Wars alone enough to counteract the woes caused by struggles at ESPN? Probably not.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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