It’s funny how one aspect of a company’s business model can dominate investor sentiment. In the case of Disney (NYSE:DIS) stock, traders should understand that there’s much more to the company than its theme parks.
Disney+ is a strong and lucrative contender in the streaming space. Yet, people still associate the company with its world-famous theme parks. It’s probably more of an emotional attachment than a logical one, but it moves the stock price nonetheless.
A case in point would be the price action in DIS stock on May 15. On that day the shares added 3%, finishing near the high of the day. The move was powerful enough to bolster the Dow Jones Industrial Average that day. And, it was related to one of Disney’s theme parks.
But is the stock-price move sustainable, or just a temporary head-fake?
All Eyes on the Sunshine State
Disney’s presence in Florida is so powerful that it’s not unusual for people to visit the state just for the Walt Disney World theme park. At the very least, it’s a primary driver of traffic and tourism in Orlando.
The spread of the novel coronavirus, unfortunately, brought the theme-park industry to a screeching halt earlier this year. In January, Disney shut down all of its theme parks, including Walt Disney World.
Not that all of Disney’s revenues come from Orlando, or even from the United States for that matter. In actuality, the company generates strong revenues in China and the shutdown of Shanghai Disneyland certainly took a toll on Disney’s bottom line.
Thankfully for DIS stock owners, the coronavirus crisis seems to have subsided in China. As a result, Shanghai Disneyland opened its doors again on May 11. However, the reopening involved social-distancing measures as well as limited attendance.
Still, that’s progress. Even with that, though, it’s the Orlando theme park that’s on investors’ radars. As long as Walt Disney World is closed, the company is symbolically dead to some investors. But could there be a ray of hope on the horizon?
Getting to a ‘Yes’
Naturally, it’s a vital goal for Disney to convince Florida Gov. Ron DeSantis to reopen the state’s economy. On the other hand, no one wants to reopen a theme park too quickly as the safety of the public could be compromised.
Still, DIS stockholders want to hear a categorical “yes” from DeSantis sooner rather than later. The governor didn’t provide that, but evidently a “maybe” is good enough for shareholder, at least for the time being.
That “maybe” came in the form of DeSantis asking theme parks, including Walt Disney World, to submit their reopening plans. DeSantis wants theme-park operators to specify a reopening date along with details as to how they intend to protect their visitors and staff from Covid-19.
“My goal on all of this is, let’s keep safety first, but let’s work and innovate to get to yes on this stuff,” said DeSantis in regard to the possibility of allowing the theme-park re-openings.
Unfortunately, the Florida governor wasn’t prepared to reveal a specific timeline. He said, “I can’t tell you when this is going to be. But I think that we need to say, ‘Come up with your plan and show us what you got.’”
So, at least DeSantis seems willing to work with Disney on this. It should be noted, though, that the governor is also requiring that the theme parks be endorsed by a local official. This could be a mayor, and in Disney’s case it would be Orange County Mayor Jerry Demings.
Like DeSantis, Demings hesitated to provide a specific timetable. However, Demings did emphasize that a reopening would occur “sometime in June or thereafter.”
June is just around the corner, so DIS optimistic stockholders can hope for a Walt Disney World in the near future. Even if it takes a while, Florida officials probably don’t want to stifle the state’s tourism revenues for much longer. Thus, it’s logical to conclude that they’ll push for a reopening sooner rather than later.
The Takeaway on DIS Stock
There’s no set date for the reopening of the Walt Disney World theme park. That might be frustrating for DIS stock investors, but it probably won’t be too long before the roller coasters are riding again and visitors are happily emptying their pocketbooks.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
