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DIS Stock Still a Buy in Spite of Coronavirus Problems

Disney's revenue may have taken a hit, but the company will bounce back

Walt Disney (NYSE:DIS) has seen huge revenue losses since the novel coronavirus forced the company to close its theme parks around the world. This financial hit also caused DIS stock to drop almost 28% year to date.

dis stock
Source: nikkimeel / Shutterstock.com

However, the company has found a way to continue to bring in revenue and persevere through this crisis. As states slowly begin to reopen, it seems likely that Disney can begin to get back on track.

The important thing to understand is that this is a temporary setback for Disney. So rather than viewing these losses as a reason to stay away, it likely presents a good buying opportunity.

Let’s look at three reasons why you may want to invest in DIS stock.

1. Disney Is Starting to Re-Open Its Theme Parks

Disney’s theme parks have been closed since March 12, when the novel coronavirus first picked up steam in the U.S. This caused the company’s revenue to take a hit, and many investors panicked, causing the stock to drop further.

But the big news right now is that Disney’s theme parks are slowly starting to reopen. The company officially opened its Shanghai Disneyland on May 11 at 30% capacity, and ticket sales quickly sold out.

That’s good news for DIS stock since it indicates that customers are anxious to get back to the company’s theme parks. Of course, Disney’s U.S. parks still remain closed, but there is a chance that some could start reopening beginning in June.

Florida has already begun phase one of its reopenings, and the state offered some guidelines on how theme parks can reopen. The company recently announced that Disney Springs will slowly start reopening on May 20, so it seems feasible that the company will reopen Disney World in June.

2. The Company’s Streaming Service Is Going Strong

Before the service launched, company leadership speculated that by the end of 2024, Disney+ could have 60 and 90 million subscribers. But within six months of launching the service, the company has already surpassed 50 million subscribers.

And it’s likely that the company’s subscriber base could continue to increase much faster due to the pandemic and stay-at-home orders many states have enacted. This led one analyst to speculate that Disney+ could surpass 200 million subscribers by 2025.

During the company’s second-quarter earnings call, Disney CFO Christine McCarthy wouldn’t discuss its current subscriber count. 200 million subscribers is a lot, but it’s feasible that Disney+ could get there considering the current conditions.

For one, there’s a lot of interest in the streaming service since it’s still only available in a handful of markets. Over the coming year, Disney+ will launch across Europe, Asia, Japan, Latin American, and Africa.

The company has the advantage of starting out with a built-in market for its service, and a global audience that’s already familiar with its brand. Considering those factors, 200 million subscribers doesn’t seem quite so out of reach.

3. DIS Stock Has Other Sources of Revenue

During the first quarter of 2020, Disney’s theme parks and hotels accounted for 33% of its total revenue. That’s a large chunk of its revenue to lose overnight, but fortunately for DIS stock, the company has other sources.

Roughly 21% of its revenue comes from its cable networks, and it also earns quite a bit from its consumer products and interactive media. While these other revenue streams may not be able to entirely offset the losses from closing its theme parks, they definitely help.

It can at least help the company slow its losses while it works out how to reopen its theme parks. And the company is still finding creative ways to raise cash during these difficult times.

In March, the company announced its first debt offering to raise $6 billion. And just this week, Disney filed a form with the SEC to offer senior notes that will be due between 2026 and 2060.

Jamie Johnson is a personal finance freelance writer and has been writing for InvestorPlace since mid-2019. She writes for a number of other well-known financial sites, including Credit Karma, Quicken Loans, and Bankrate. As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/05/dis-stock-still-a-buy-in-spite-of-coronavirus-problems/.

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