Disney Stock Down After Furloughs, Analysts Downgrade

After news Disney is furloughing 100,000 employees — half its workforce — because of business shutdowns due to the coronavirus pandemic, Wall Street April 20 at the opening dropped the media giant’s stock more than 3%.

Disney, which is telling affected staff to seek state and federal financial assistance, said the furloughs would save the company $500 million monthly while it continues to pay employee healthcare and related benefits.

Wall Street analysts responded in force.

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John Hodulik with UBS downgraded the stock to “neutral” from “buy,” cutting his price target to $114 from $162. The analyst contends Disney is facing a long road to recovery, especially in its theme park and cruise businesses — both, he believes, will not be fully operational until Jan. 1, 2021.

“[They] will be impaired for a longer period of time,” Hodulik wrote in a note.

Meanwhile, Credit Suisse dropped its rating to “neutral” from “outperform” due to similar concerns about Disney’s amusement parks business.

Analyst Doug Mitchelson remains positive on Disney long-term, saying liquidity issues appear overblown and eyeing a return to $160 per share from its current $102 price.

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“We expect a full rebound in theme park and Hollywood operations over time,” he wrote with the caveat that the mid-term outlook remains challenged. “We expect Disney will remain in a more narrow trading range given a remarkable lack of operational visibility, expected severe cuts coming to street estimates, and a now more equally balanced mix of positive and negative catalysts.”

Disney to Furlough Non-Essential Employees Beginning April 19

In the wake of the coronavirus pandemic, The Walt Disney Co. will start furloughing non-essential U.S. employees April 19, the company announced.

Disney committed to full pay and benefits for all employees through April 18.

“With no clear indication of when we can restart our businesses, we’re forced to make the difficult decision to take the next step and furlough employees whose jobs aren’t necessary at this time,” a Disney representative said in a statement.

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Furloughed workers will remain Disney employees through the furlough period and will receive full healthcare benefits with Disney will paying the cost of premiums.

Disney did not report the number of employees that would be affected.