Disney(NYSE: DIS) has been around since 1923, but the business made key strides in establishing its empire in the 50s and 60s. That's when its collection of iconic intellectual property was ideally positioned ahead of what would become a global revolution in home and theatrical entertainment.
Below, Motley Fool investors offer a few investing ideas in companies that appear to have similarly strong growth profiles. Read on to see why Activision Blizzard(NASDAQ: ATVI), AMC Networks(NYSE: AMC), and Shopify(NYSE: SHOP) remind these investors of Disney back in its early days.
A look at a Disney castle.
Image source: Disney.
This game is in its early levels
Demitri Kalogeropoulos (Activision Blizzard): In its early days, Disney controlled a treasure trove of intellectual property just as the golden age of television was about to begin. I see similarities in that fortuitous situation to the one facing Activision Blizzard today.
The video-game publisher owns many of the industry's most iconic franchises, and it keeps adding to that list with each passing year. For every Call of Duty that's over a decade old, there's an Overwatch or a Hearthstone that's just hitting its stride. In other words, like Disney, Activision has a knack for generating valuable global entertainment brands.
Activision controls its own distribution platform, and that hold is becoming more concrete as spending moves online. That means the company should reap big rewards as it moves to capitalize on a user base that rivals some of the most addictive online communities around. In 2018, executives plan to roll out an advertising initiative just as Activision's early stabs at eSports leagues are projected to reach profitability.
Disney's decades of business success showed how just how valuable entertainment content can be when a company can monetize those properties across different industries like TV, films, and consumer goods. Activision Blizzard has the tools to follow that playbook, only with the online sales channel taking the place of traditional broadcast television.
Another master storyteller
Jeremy Bowman (AMC Networks): In 1957, Disney had just opened Disneyland, had produced a number of hit animated films, and was just beginning to implement a corporate strategy that has made it a dominant force in American entertainment since.
Movie fans eat popcorn at a theater.
Image source: Getty Images.
One company that seems to have a similar bevy of creative assets waiting to be tapped is AMC Networks, the parent of cable channels IFC, Sundance, WeTV, and BBC America, as well as its namesake. You may be more familiar with the company as the engine by award-winning hit shows like Mad Men, Breaking Bad, Better Call Saul, and The Walking Dead.
The stock has struggled in recent years amid the larger headwinds in the cable industry as Americans have turned away from traditional pay-TV packages in favor of streaming providers like Netflix. As Disney and others prepare to roll out their own streaming services, though, that upheaval could create an opportunity for AMC, which has a bounty of binge-worthy content that streamers like Netflix covet.
With Apple, Facebook, and others looking to get into streaming, and Amazon expanding its content spending, it seems like one of these entertainment giants could make a bid for AMC Networks, or if not, that the value of its content library and studios will go up.
Considering how cheap the stock is at a P/E ratio of less than 10, the company could be especially appealing as a takeover target as the price of content and the arms race around it only seem to be heating up.
E-commerce is the place to be
Neha Chamaria(Shopify): Disney's exponential growth over the decades can be traced to its surging profits. Shopify isn't even profitable yet, but the torrid pace at which the company's top line is growing could only be the trailer for a super hit movie in the making.
Shopify is a young company that's striving to make a mark in the red-hot e-commerce space by providing a cloud-based platform to small and medium-sized businesses, allowing them to set up online stores and sell their products. That may sound unexciting until you realize that Shopify already counts some of the biggest e-commerce and social network companies, including Amazon.com, among its partners.
A man places his credit card information into a laptop.
Image source: Getty Images.
As a company in the early stages of its lifecycle, Shopify is rightly focused on expanding its merchant and customer base and growing its top line. The company's merchant base has crossed 500,000, and its trailing-12-month revenue grew more than 370% in the past three years.
Two things excite me about Shopify. First, the future of retail, as we all know, is online; and Shopify is positioning itself to ride the upturn. Second, Shopify's CEO, Tobi Lutke, is a huge fan of technology, which should add substantial value to the company going forward. Last month, Apple's CEO Tim Cook even visited Shopify to check out its augmented reality (AR) technologies. Lutke, on his part, aims to make Shopify an "AR-enabled e-commerce platform."
If Shopify looks pricey at the moment, chances are, you might look back and wish you'd bought the stock some decades down the line, much like with Disney.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Demitrios Kalogeropoulos owns shares of Activision Blizzard, Apple, Facebook, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, Apple, Facebook, Netflix, Shopify, and Walt Disney. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short March 2018 $200 calls on Facebook, and long March 2018 $170 puts on Facebook. The Motley Fool has a disclosure policy.
