The spread of the COVID-19 coronavirus has upended the entire entertainment industry and forced the hands of major companies to completely alter how they do business and their plans for the rest of the year. The Walt Disney Company has been forced into the longest closure of their theme park resorts around the world, not to mention postponing feature film release dates and furloughing thousands of employees. As a result of all this turmoil that has effected their bottom line, the company's stock has taken a drastic tumble and their rating by analysts has now been effected as investors look toward the future.
Financial researchers MoffettNathanson published a new report on Disney's stock and future, downgrading the company from "buy" to "neutral." Analyst Michael Nathanson wrote: "There are a number of risks that could lead this unprecedented event to have a longer impact, with earnings revisions massively skewed to the downside. Our Disney downgrade is also an admission that we believe the economic impact on the company will be longer than most anticipate, especially given the risks of a second wave of infections after reopening. As economic pressures from COVID-19 become more evident, we expect to see further pressure on earnings, limiting the stock's performance for the near-to-medium term despite the company's strong position longer-term."
Nathanson added that the financial hardships the company is in this year will likely be overlooked but that once the coroanvirus pandemic has been passed by the world, investors will see its effects on companies like Disney for many years.
"We do expect Disney to be given a pass from investors on fiscal year 2020 (which ends in September) earnings and to some degree fiscal year 2021 as the impact of the pandemic likely lingers," he added. |However, we are also reducing our fiscal year 2022 forecasts to factor in the additional risk and uncertainty about what a new normal will look like across most of Disney's businesses. Looking at those fiscal year 2022 forecasts, the risk-reward is just not that compelling....While Disney has the advantaged assets to win in this new world, we fear that the uncertainty of the present situation creates significant and unrivaled earnings risk for the foreseeable future."
As of this writing it remains to be seen when the Disney parks will begin to re-open, but a report emerged last week about the safety precautions they might be taking if they decide to open their gates in the near future. When it comes to theatrical exhibition, their live-action remake of Mulan is their next film scheduled to be released and is targeting a July debut in theaters but it's unclear if that will happen. Luckily for Disney they remain full steam ahead on their Disney+ streaming service, which crossed the 50 million paid subscribers threshold less than a month ago.
(H/T The Hollywood Reporter)
(Cover photo by Scott Olson/Getty Images)