Walt Disney’s (NYSE:DIS) decision to delay the release of the Pixar animated feature “The Good Dinosaur” by 14 months sent tongues wagging in Hollywood, but barely caused a ripple on Wall Street.

In fact, this is probably good news for investors. Burbank, Calif.-based Disney has had two high profile flops in the past two years “John Carter” ($200 million write down) and “The Lone Ranger” ($190 million write down). Though the Disney, which has a market capitalization topping $117 billion, can afford to take the hit, those losses aren’t small potatoes either. CEO Bob Iger fired Rich Ross as head of Disney Studios after the “John Carter” debacle. This year it trimmed about 150 jobs from the unit.

Disney’s caution is a good thing even though it also means delaying the release of “Finding Dory” a sequel to the classic “Finding Nemo” by 7 months. Investors would rather Disney take its time to “get a movie right.” The company’s Studio Entertainment business continues to be a laggard. Operating income in the latest quarter fell 36% to $201 million while revenue slumped 2% to $1.59 billion. According to Box Office Mojo, Disney’s Buena Vista studios trails Time Warner’s (NYSE:TWX) Warner Bros. and Comcast’s (Nasdaq:CMCSA) Universal in the box office so far this year with 14.6% market share. Among the studio’s hits were “Monster’s University”, which has grossed more than $730 million.

There are already signs that the company has learned from its mistakes. Jerry Bruckheimer’s fifth installment in the “Pirates of the Caribbean” series was pulled from the production schedule earlier this month. Bruckheimer’s latest film was “The Lone Ranger.” In another development, “The Good Dinosaur” Director Bob Peterson left the project last month, according to Bloomberg News.

Going forward, investors are going to expect big things from Disney’s film business, especially given its $4 billion acquisition of Lucasfilm, the producer of the “Star Wars” franchise. The media and entertainment conglomerate is already trying to integrate the characters into the Disney universe. Stores at Walt Disney World , for instance, sell action figures of Kermit and Miss Piggy dressed up like Luke Skywalker and Princess Leia. They even have Mickey Mouse ears shaped liked R2D2.

For now, “Star Wars” fans will have to be satisfied with these cute knick-knacks. New “Star Wars” movies won’t begin to be released until 2015.

Though its fun to talk about movies and Hollywood, investors need to view this in a broader context. It’s never a good idea to buy Disney or any other entertainment stock solely based on one hit. They come and go. Disney, though, has a broad array of businesses such as ESPN and its Theme Parks and Resorts that can help make up any shortfall from its box office disappointments. In fact, the Theme Parks should continue to do well unless the economy seriously goes off the rails. Walt Disney World remains one of the top destinations of foreign tourists visiting the U.S. Though costs for sports programming continue to skyrocket, ESPN should hold its own, at least for now. Pay TV providers are becoming increasingly combative about paying fees to channel operators. ESPN’s are by far the highest on a per-subscriber basis.

Shares of the Burbank, Calif.-based company were off 0.80% at $65.20 at last look. The stock trades at a price-to-earnings ratio of 19.9, a premium to rivals such as 21st Century Fox (Nasaq:FOXA) and Time Warner. Disney, though, may have more room to run.

The average 52-week price target on the stock is $72.24, about 10% above where it currently trades. If Disney can fix the problems in its film studio business, there is no reason why the stock couldn’t easily reach that goal.

Disclosure - Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr and at Jonathanberr.com

Related Articles
  1. Fundamental Analysis

    How Original Series Shake up the TV Business Model

    Two decades ago, a network could make a decent profit airing "Full House" reruns. Now viewers expect CGI dragons, A-list film stars, and complex character development. Have mercy!
  2. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  10. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Conglomerate

    A company that owns controlling stake in a number of smaller ...
  3. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  4. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!