Disney Stocks Fall Slightly Before Q3 Reports
Disney stocks are down by 0.59%. It closed at $116.35 per share on Monday’s stock market, as anticipation rose on the release of its third-quarter earnings report. This is a painful fall from its pre-pandemic 52-week high of $153.41.
The House of Mouse lost $1 billion in operating income in the height of closures. Moreover, half of it came from its US-based locations in California and Florida. Its competitor, Universal, lost 94% of revenue in the second quarter, where it generated only $87 million in total sales.
International locations in Shanghai reopened on May 11, followed by Hong Kong on June 18. But the latter re-closed due to a rising number of infected cases. Both locations suffered from extremely reduced operating capacities due to social distancing measures, thereby hurting occupancy.
Full-scale reopening is still on talks as this will depend on lawmakers’ decisions and demand itself, which is looking rather grim due to rising cases, especially in Florida. Similarly, cruise ships and resort ventures are stagnant. The US is currently placed under the no-sail policy until next month and is subject to extension.
In Q2, the company reported its pending construction projects amounting to $900 million due for completion within the fiscal year. While the overhaul budget is overwhelming, some attractions may not be making a comeback, including several regular shows.
Included in the roster of those attractions closed for good is Stitch’s Great Escape, located in the Magic Kingdom. Similarly, Disney’s Animal Kingdom Theme Park also lost its nighttime show Rivers of the Light, debuted just three years ago in 2017.
Future Ventures and Disney+
TV and film productions are on hold due to rising coronavirus cases in the United States. Movie releases, including Mulan’s anticipated screening, has been put on hold from August 21. Other big earners such as Avatar and Star Wars expects a one-year schedule delay. This means there will be no Avatar 2 in 2021 and Star Wars in 2022.
The predicted sales for the April-to-June quarter have fallen 40% compared to the company’s performance in the same period last year. This translates to a $0.61 loss from $1.35 profit per stock in 2019.
Disney+, a direct-to-consumer streaming unit, added some good news to the stagnant performance. Initially developed for stay-at-home opportunities, exactly what lock downs are about, the enterprise has 56 million new subscribers since its launch in November 2020. An expected 150 million subscribers in 2025 is bright, sealed by its Japan launch in June. This will drive better profit prospects for Q3 than with the previous quarters.
The less than a year-old enterprise is still in the stage of unprofitability. Nevertheless, its growing influence especially among American users is undeniably a vital lifesaver of the Walt Disney Co.
The blue-chip entertainment brand will bounce back in revenue through increased ticket and hotel prices once the tourism industry wakes up from a deep slumber. However, profitability may not reach pre-pandemic levels until 2025, and stock trading will worsen before it gets better.
