Disney got downgraded by a credit rating firm due to all problems they have endured during the extended coronavirus shutdowns. A new report from Lightship Partners analyst Richard Greenfield (via THR) cast a pretty dour light on the giant entertainment empire. He downgraded their stock to “sell” this week. This pandemic has run roughshod over so many of Disney’s categories that there might be a long road back then some had anticipated. The theme parks are shut down at the moment, as well as movie theaters in much of the world. Those two outlets are huge for the company and make up a sizable chunk of revenue. However, there have been some bright spots with Disney+, but it looks unlikely that the streaming platform will be enough to steady the ship.
Greenfield writes, ”Disney has gone from being on top of the world a la Lion King (devouring Fox), to feeling like Eeyore stuck in the middle of a perfect storm with no end in sight, an inexperienced CEO and furloughing tens of thousands of employees to reduce costs and sustain a dividend that should have been cut immediately.”
"Disney is built on shared group experiences. Until there is global comfort health-wise with that behavior again, Disney’s earnings are fundamentally impaired," he detailed in the report.
The report continues to suggest methods for Disney to cut cost by letting some properties go and shifting focus to Disney+. Even with that possible shift in the wings, there are still a lot of hurdles to clear. For example, if theaters open back up and people begin to move around more normally, will they be down to visit theme parks? Is anyone going to want to watch Black Widow with a mask on the entire time? All of the questions will determine how quickly Disney can get back to normal.
Greenfield writes, ”even if Disney+ achieves 100 million subscribers in 2022, we expect revenue to be a fraction of Netflix. For now, Disney+ is really more of the SVOD outlet for Disney feature films (like HBO or Showtime) rather than the focal point of the entire company’s content creation."
For now, the reopening of the Shanghai Disneyland location will be a huge test. If there are no hiccups, that would be huge for the company moving into the latter part of this year.
Will you be visiting Disneyland or Walt Disney World when the Stay at Home order lifts? Let us know in the comments!
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