March 25, 2020
Mr. Toad’s Wild Ride has been a mainstay at Disneyland since the amusement park opened in 1955. On March 23, 2020, at high noon Disney experienced a wild ride of a different kind: Wall Street.
On that day at lunch time, Disney’s stock dropped to $81.57 per share, the media giant’s lowest stock valuation since Jan. 1, 2014. In fact, Disney’s market capitalization was briefly valued at less than Netflix’s.
Despite its diversification and global brands, Disney, along with Comcast’s Universal Studios, is at the epicenter of the fiscal mayhem caused by the coronavirus pandemic. The company operates amusement parks, vacation cruises, a movie studio, television production (ABC TV, ESPN, Disney Channel), consumer products and an over-the-top business. All, except for OTT, have effectively been sidelined by the pandemic as governments around the globe quarantine their citizens, restrict retail, sporting and social interactions.
And while the Disney+ subscription streaming service, which launched March 24 in Western Europe (except France), is projected to rival the successful U.S. debut last November, it isn’t expected to turn a profit until 2024 — at the earliest.
“All three major parts of their operation are under extreme pressure over the course of the next few weeks,” Rich Greenfield with Lightshed Partner, wrote in a recent note.
Fitch Ratings said the coronavirus pandemic would materially weaken Disney’s operating and credit profile over the near term (next two to three quarters).
However, Fitch anticipates that Disney’s businesses will normalize gradually in step with the return of economic activity as the coronavirus threat diminishes.
Disney is being more cautious.
“We have closed our theme parks; suspended our cruises and theatrical shows; delayed theatrical distribution of films both domestically and internationally; and experienced supply chain disruption and ad sales impacts,” Disney said in a March 19 regulatory filing.
“In addition there has been a disruption in creation and availability of content we rely on for our various distribution paths, including most significantly the cancellation of certain sports events and the shutting down of production of most film and television content,” the company said.
The next day (March 20), Disney sold more than $6 billion in long-term bonds (debt) to help finance it through the pandemic — and not rely too much on the government’s pending $2 trillion bailout.
To be sure, the Disney brand is a force of nature, with intellectual property that resonates globally through myriad distribution channels.
And Disney shares rebounded significantly March 25 following the Disney+ Euro launch.
“The stock seemed to benefit from the perception that it has been oversold as shares have fallen sharply during the coronavirus crisis,” wrote The Motely Fool’s Jeremy Bowman.