Among the major blue chips, you can’t help but feel that an ominous cloud is surrounding Disney (NYSE:DIS). Even before the novel coronavirus pandemic, Disney turned heads with its multiple expensive acquisitions. But in the end, management justified their aggressively accretive strategy because the company now owned a dominant entertainment trifecta: its signature resort business, sports (via ESPN) and of course its high-profile movie franchises. But unfortunately, these are the very things that make DIS stock a liability today.
When Covid-19 reared its ugly head outside China’s borders, many folks voluntarily sheltered themselves at home. But in the U.S. and across the world, lockdowns and stay-at-home orders became part of our new normal. For most affected regions, that meant all non-essential businesses would be closed. And as much fun as going to Disneyland is for the family, this excursion is about as non-essential as it gets.
Next, you have ESPN. Long a sore spot among the many impressive assets underlining Disney, ESPN has hemorrhaged viewership statistics. To be fair, this isn’t entirely ESPN’s fault. Overall, TV sports viewership has declined despite the product arguably becoming more compelling.
Now, Disney has an even bigger problem — no views at all. With major professional leagues shutting down due to pandemic concerns, there’s no point watching ESPN. And that makes for a very glaring bearish case for DIS stock.
If that wasn’t enough, you have an identical situation impacting the movie business. In stunning news last month, AMC Entertainment (NYSE:AMC), Regal Cinemas and Cinemark (NYSE:CNK) all shut down.
Despite how terrible this looks, investors may want to adopt the contrarian approach, especially if Disney stock falls into the $90 range.
DIS Stock Can Rise on Resilient Theme Parks
Intuitively, you wouldn’t expect it. But theme parks — at least the Disney-branded ones — are incredibly resilient, even against economic downturns. Moving past the pandemic, I expect a substantial bounce-back in consumer demand.
Back in 2008, attendance at the company’s flagship theme park, Disneyland, slipped 1% to 14.7 million guests. Unsurprisingly, the shock market collapse that year gutted demand. Additionally, the housing crisis did nothing to bolster consumer sentiment.
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Despite this ugliness, Disneyland attendance skyrocketed off the lows the following year, hitting 15.9 million. That’s an 8.2% lift from 2008’s tally. Attendance continued to generally increase, though the company saw a 1.1% slowdown in 2012. But from 2013 onward, guest volume reached new heights.
Now, what makes this circumstance so special is that unlike the Great Recession, families didn’t have an opportunity to enjoy a limited Disney experience. Instead, whether they had the means or not, government bodies forced everyone out. Therefore, demand is simply raring to get back into the swing of things.
You must remember that Disney theme parks aren’t just entertainment; they represent a chance for families to bond with their children. Unfortunately, this year represented many broken promises to distraught children. You better believe that mom and dad are extra eager to make this right. Thus, don’t be surprised to see DIS stock storming back with a vengeance.
America Needs Sports
You’ve all heard the phrase: when life gives you lemons, make lemonade. In light of the unprecedented sports league shutdowns, many athletes have simply gone home. But others are making the best out of an awful situation.
According to Racer.com, iRacing, an extremely popular auto racing esports league, is “meeting the moment” with aplomb. In fact, many professional race car drivers use the iRacing platform to stay sharp during the offseason. Now, it’s become a critical mitigation factor.
From Formula 1 to Indycar to Nascar, drivers from around the world have logged on to participate in simulated events. So far, fans of various racing disciplines have enthusiastically gathered together to watch their favorites go head-to-head. Honestly, what else are they going to do?
While some sports have natural synergies with eSports platforms, I can’t help but notice that our most popular ball games — football, basketball and baseball — have no meaningful substitute. I’m not about to spend my Sundays watching computer nerds thumb and tap their way to a touchdown. I know that millions agree with me.
Therefore, when real sports is finally given the green flag, I can’t help but think of the demand burst that DIS stock will enjoy. Being cooped up at home is bad enough. But without sports? For many Americans, it has been a nightmare.
Fortunately, that nightmare appears to be coming to an end.
The Box Office Is an Irreplaceable Experience
Thanks to the proliferation of the Internet of Things, it’s no wonder that streaming and in-home entertainment has taken off. With technology, you really don’t have to leave your house for anything these days.
Yet some entertainment options are just not the same at home. Consider 1917, a World War I film released early this year. Utilizing a simulated single-shot cinematography, the movie is incredibly immersive. Sure, you can download it and watch at home, but believe me — it’s just not the same.
And that’s exactly how many Star Wars fans feel. Although fan reviews for the last three Star Wars films of the original canon can be incredibly divergent, millions of them flocked to their opening release date. Again, you can download the series, but the big box office experience cannot be duplicated.
Plus, with every movie lover denied entry, we will naturally see a demand spike once the doors finally open. Ultimately, it just makes sense to buy DIS stock on the dips in anticipation of normalcy.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
