Disney World Cautiously Reopens; Analyst Optimistic On Outlook

Walt Disney Co. (DIS) reopened its popular theme park, Disney World on July 10 after closing nearly four months ago as a result of the COVID-19 outbreak.

The theme park reported attendance for its two areas, Magic Kingdom and Animal Kingdom with a combined 16,000 visitors for the reopening. This falls well below the pre-COVID average of nearly 100,000 people per day. Disney plans to reopen the remainder of its park on July 15.

Disney’s stock was up 2% at market close on July 10 at $119.32 per share.

Disney is requiring everyone in the park to wear a mask except for swimming as well as eating and drinking. A limited number of restaurants and hotels are back in business and more are planning to open in the coming months.

J.P. Morgan analyst Alexia Quadrani was optimistic on July 10 regarding Disney World saying that the “reopening of the parks globally is a critical sign of recovery as this removes the largest overhang at the company due to Covid-19.”

She also highlighted Disney’s streaming platform known as Disney+, saying with “increasing conviction that the health of the company is returning throughout several of its segments, with a move toward profitability in fiscal 2023 at Disney+, the reopening of the parks, and the return of live sports.” The analyst reiterated a Buy rating on the shares and a price target of $135 (implying 13% upside potential).

In May, Disney revealed a loss of $1.4 billion in its second-quarter earnings. The amount accounts for its theme parks, retail stores, TV operations, and other divisions.

Disney said on May 5, “The impact of COVID-19 and measures to prevent its spread is affecting our segments in a number of ways, most significantly at Parks, Experiences and Products where we have closed our theme parks and retail stores, suspended cruise ship sailings and guided tours and experienced supply chain disruptions.”

The result of the pandemic mainly impacted its theme parks in Florida, California, Paris, Tokyo, and Shanghai in addition to Disney’s cruise ships. Overall Disney earnings fell to $475 million which was a 91% loss compared to $5.4 billion reported earnings in the same period last year.

On July 8, Guggenheim analyst Michael Morris lowered his Q3 and Q4 estimates for Disney’s theme parks and media as a result of the Q2 earnings. He maintains a Hold rating on the stock and raised the price target from $115 to $123, which implies a 3% upside potential.

Disney’s stock is down 18% year-to-date. Overall, 8 analysts assign Buy ratings, 11 Hold ratings, and 2 Sell ratings, giving Disney a Moderate Buy Street consensus. The average analyst price target stands at $122.18 suggesting 2% upside potential in the coming months. (See Disney’s stock analysis on TipRanks).

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