Iger Made His Big Announcement, But Some Analysts Wonder How Disney Can Maintain This ‘Unsustainable’ Spending

Earlier this week, Disney CEO Bob Iger made a major announcement about the future of Disney Parks. Flanked by the Chairman of Parks, Experiences, and Products, Josh D’Amaro, Iger told a group of Wall Street investors that the Walt Disney Company plans to invest $60 billion into its parks over the next decade. The sheer size of the investment blew Disney fans away, but it left Wall Street wondering, where’s he getting this money from?

Credit: Disney; Thomas Hawk, Flickr

While Disney Parks and cruises have been a steady moneymaker for the company, Disney’s business as a whole has been declining. Disney saw a decline in its film division, losing nearly $1 billion this year alone. Disney’s fight with Charter Communications also laid bare some of its issues with its television assets. Rumors have spread that Disney is considering selling ABC and making ESPN a streaming-only channel.

With that as the backdrop, Disney’s stock lost more than three percent in the hours immediately after Iger’s announcement. While the stock has rebounded slightly, it is still near its lowest point in nine years. Analysts now wonder if it’s wise to gamble on the park’s “unsustainable and elevated profit margins.”

Credit: Disney

A Barclay’s analyst told Reuters:

Expanding parks and cruises tends to be a multi-year undertaking as a result of which, revenue and margin acceleration lags the investment cycle. The struggle for investors may be to match their investment horizon with the return horizon of the company’s plan. Disney will likely face more competition and some of this investment may also be intended to deal with this competitive backdrop.

Disney faces competition from Universal Studios in Florida, but it’s unclear how much money will go to expanding Walt Disney World. Universal has already begun work on its Epic Universe theme park, including a Super Nintendo World, and its Dreamworks Animation Land will be opening in 2024.

At the D23 Expo, D’Amaro announced that significant changes would come to Disney’s Animal Kingdom, including retheming DinoLand U.S.A. into a South and Central American-theme land, including Encanto and Indiana Jones taking over Dinosaur. Josh D’Amaro also teased a Magic Kingdom expansion, calling it the largest in the history of the park, but beyond that, he offered very few details. However, fans went crazy with the possibility of a Villian’s Land coming to the Magic Kingdom, but all that is just talk for now.

Credit: Disney

Disney has also announced an expansion of Disneyland in California. There were few details about the expansion until last week when an environmental report was leaked. The report says more than a dozen new rides will be added to California parks.

When Iger announced the $60 billion, he also said that Disney plans on doubling its cruise capacity. Disney recently launched Disney’s Wish and will launch two more cruise ships shortly, and it recently purchased another partially completed vessel.

But now that Disney’s CEO has announced all these toys, he will have to figure out how to pay for them without further damaging Disney’s stock price. But CEO Bob Iger is putting Disney’s money to work in the one profitable area: Walt Disney Parks worldwide. Let’s hope this pays off.

We will continue to update this story at Disney Fanatic.