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June 06, 2006

My Expectations for Disney's Cars

Disney (DIS) made a new 52 week high in Monday's abysmal market, likely anticipating this coming weekend’s opening of Cars. I think the Cars hype is also helping Regal Entertainment (RGC) which has performed relatively strongly the last few sessions. Northlake remains long both stocks although DIS is approaching my target for considering a sale.

I think the Cars opening will be very large, easily exceeding the $68 million for the Ice Age sequel earlier this year. One good sign for Cars is the solid legs for Over The Hedge. Although the film will not be a mega hit, its weekend-to-weekend drop-off has been modest. This shows that the market is out there for a film appealing to children. Also working in Cars favor is that young boys love to play with cars and trucks. The young boy demographic can be tough to reach. A final factor I see helping Cars is the appeal it has to the huge NASCAR fan base. NASCAR's fan base is a broad swath of middle America, one that has driven other movies like Passion of the Christ to huge numbers.

I have read a few cautious comments regarding the box office potential on some movie blogs. They are of the variety that Cars is very good but not as good as we have come to expect from Pixar.

Excluding the unusual success of Finding Nemo, the recent Pixar films each did around $250 million domestically (Toy Story 2, Monsters Inc., and The Incredibles). Incredibles and Nemo each opened at $70 million, Monsters started with $62 million, and Toy Story 2 began with $57 million.

My prediction is that Cars will pull in around $250 million for its domestic run with an opening weekend north of $80 million. The larger opening than prior Pixar films with a similar total run respects the front loading that is appearing with increasing frequency of late. Popular films are showing an increasing tendency to burn out more quickly. This is more of an issue for theatres than studios but is something to be aware when analyzing opening weekend trends.

Posted by Steve Birenberg at June 6, 2006 02:18 PM in DIS