The Lone Ranger, Disney's most recent bet on rebooting a legendary franchise into a summer blockbuster, is an instant flop. But because Disney is so big and diversified — owning theme parks, cable TV networks, and consumer product lines, among other assets — investors don't seem to mind.
Lazard Capital senior analyst Barton Crockett wrote in a research note Monday that Disney could lose as much as $190 million on the movie. The film, which stars Johnny Depp, only grossed $49 million over the five-day holiday weekend, but cost an estimated $215 million according to Box Office Mojo. Marketing and promotion costs typically average about 50% of a movie's production budget, so that would translate into another $100 million.
"Many investors had been skeptical about Disney's The Lone Ranger reboot," Crockett wrote. "They were right. It was the weekend's lone misfire, and based on our math, could be pacing for a $190M write-off, vs the $113M loss in our published Disney model, a delta of about $0.03 if taken in Disney's Sept.-ending quarter."
Still, during the first hour of trading Monday, Disney shares were up 1.1%, or 73 cents, to $64.55.
The reason is because the failure of one movie isn't likely to have a major impact on Disney's overall operations. Indeed, Lazard still rates the stock a buy.
"Disney is an investment in the resilience of ESPN, execution in one of the world's leading Parks & Resorts operations, and Disney's recurring ability to create and monetize family content globally on TV and in the movies," the note reads.
The Lone Ranger film was widely panned by critics. The movie has a score of 38 out of 100 across more than 30 reviews on review site Metacritic. Disney faced a similar situation when it wrote off about $200 million following the poor performance of John Carter, which scored a 51 out of 100 across more than 40 reviews and led to the departure of Disney Studios boss Rich Ross.