Disney Parks: Stock Analyst Looks At Reopening
We’re all sitting by our computers; just getting excited about the opening of the domestic Disney parks. And some folks are running numbers.
And, frankly, they should be – did you look at Disney stock today after hints of COVID-19 surges spooked Wall Street?
Yeesh. Kids. Yeesh.
Watching The Bottom Line
But the Hollywood Reporter’s Georg Szalai was thinking seriously about the bottom line before the markets opened:
After Disney’s recent earnings report, [Bernstein analyst Todd] Juenger estimated that the Hollywood conglomerate’s theme parks would lose $1 billion in earnings before interest and tax per month while shutting down due to the novel coronavirus pandemic. On Thursday, he returned to the topic with an estimate of parks’ profitability when reopened at reduced capacity… His conclusion: “Disney can generate enough profit contribution to cover the incremental fixed and variable costs of operating its parks when operating at about 25 percent of normal run-rate attendance,” meaning pre-pandemic attendance. That visitor-level would make the reopening of the domestic parks “worth” it for the company, he explained.
However, on Thursday, Walt Disney stock lost almost $10 a share.
Disney Stock: One The Day’s Biggest Losers
Some of the stock market’s biggest losers Thursday were companies that would be negatively affected if the virus’s grip on the U.S. economy tightened again. United Airlines, American Airlines, and Delta all dropped more than 14 percent Thursday. Boeing led the Dow slide, falling 16 percent. Norwegian Cruise Line tumbled 16 percent and Carnival Corp. sank 15 percent. Walt Disney, which is preparing to open some parks, was off nearly 8 percent… “Fears of a second wave are beginning to cause anxiety in the stock market,” said Torsten Slok, chief economist at Deutsche Bank Securities. “[Fed Chair Jerome] Powell did what he could to be dovish, but there is nothing the Fed can do about the risk of a second wave of the virus.”
Potential For Confusion Re: Disney Stock
Meanwhile, Szalai predicted almost everyone’s concern:
“Juenger also warned investors about “a big potential for confusion of statements/headlines about ‘reduced capacity,” explaining: “Believe it or not, we estimate Disney domestic parks currently operate at only about 51 percent of maximum theoretical capacity (e.g. ‘fire code capacity’). Hence, for instance, if Disney were to limit attendance to 50 percent of run-rate levels, we estimate it would be operating at about 25 percent of maximum theoretical capacity.”
And hey, I will proudly say I bought another Disney share today. Disneyland is opening soon! Disney World is opening soon!