Disney's (DIS) Parks to Remain Shut on Coronavirus Woes

Zacks Equity Research

Disney DIS is keeping its park gates in California and Florida closed for an indefinite period. Per MarketWatch report, the company cited guidelines from health experts and government officials related to the coronavirus pandemic to justify its decision.

Disneyland Resort in Anaheim, CA and Walt Disney World Resort in Orlando, FL, were expected to reopen after Mar 31.

Notably, the United States now reels under the burden of maximum coronavirus cases in the world, per the Johns Hopkins University data. Total number of infected persons in the country now stands at 143,055.

Disney also shuttered its Paris resort due to the coronavirus (COVID-19) outbreak in mid-March. Its theme parks in Hong Kong, Shanghai and Tokyo too remain closed since late January in response to the coronavirus outbreak, which had its epicenter in China.

The Walt Disney Company Price and Consensus

The Walt Disney Company Price and Consensus

The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote


Coronavirus Harms Disney’s Prospects, Movie Slate

Disney in an 8K filing on Mar 19 cautioned against the adverse impact of the coronavirus outbreak on its business. Management stated that it seems a daunting task to estimate the near-to-medium term performance of its businesses.

Moreover, Disney delayed the theatrical distribution of its films, both domestically and internationally. The company postponed its May movie releases including the Marvel superhero production Black Widow besides Mulan, The New Mutants and Antlers.

Disney also experienced the impact of ad sales similar to social media companies like Twitter TWTR and Facebook FB.

Notably, Twitter withdrew its revenue and operating income guidance for the first quarter of 2020 due to the growing impact of coronavirus on the global operating and economic environment as well as on advertiser demand. Facebook admitted that its ad business took a huge beating in countries severely hit by the novel coronavirus. (Read More: Coronavirus Hits Ad Sales of Facebook, Twitter and Others)

Disney Raises Debt, Boosts Disney+ Offerings

Disney recently issued a tranche of bond notes to raise debt worth roughly $6 billion. The company also generated $1.3 billion through a Canadian debt offering.

The extra cash strengthens the company’s liquidity position as it continues suffer heavy losses due to theme park and cruise business closures. Cancellation of sports events is expected to hurt its ESPN business. Additionally, shutting down of production of most film and television content is expected to affect future slate of releases.

However, this Zacks Rank #3 (Hold) stock has been bolstering its Disney+ content portfolio to gain users currently on lockdown due to the pandemic-related social distancing dictum. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For instance, Disney launched Frozen 2, three months ahead of schedule on Disney+ in the United States on Mar 15. Disney and Pixar’s Onward will also be available on Disney+ on Apr 3 in the United States.

Although the company delayed the launch of Disney+ in India and France, it unveiled its streaming service in Britain, Ireland, Germany, Italy, Spain, Austria and Switzerland with compromised picture quality.

Notably, Facebook, Netflix NFLX, YouTube and Amazon prime video have downgraded their video quality to ease the pressure on the Internet and facilitate work-from-home regime and online-learning routine during the current confinement phase across the European continent in combating the spread of the coronavirus. (Read More: Facebook Cuts Video Streaming Quality in Coronavirus-Hit Europe)

Nevertheless, the growing popularity of Disney+ makes it a major driver for Disney’s prospects owing to a strong content portfolio and a cheaper bundle offering.

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