Disney Stock Is This Year’s Streaming War Winner

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The novel coronavirus pandemic put Disney (NYSE:DIS) in a parlous position. With movie theaters, parks and cruises all closing Disney stock quickly tumbled into the red. But it’s not all doom and gloom. Although Disney hasn’t managed to make a full recovery, it’s on the path towards a comeback.

The sign for a Disney (DIS) retail store in York

Source: chrisdorney.Shutterstock.com

The 42% decrease in revenue in the third quarter reflects the pain Disney has experienced this year. However, the success of its streaming services managed to ease the blow. And these services have gained greater relevance amid the pandemic. With a second surge of coronavirus cases creeping its way across the globe and social distancing requirements still in place, the demand for at-home entertainment is now greater than ever.

That makes a strong case for a comeback in Disney stock heading into 2021. Here’s a look at what you might expect from the entertainment juggernaut moving forward.

Disney Is a Streaming War Winner

The surge in demand for its streaming service, Disney+, helped drive much of its revenue this year. As of August, the platform had over 60.5 million paying subscribers worldwide. This is a feat that took Netflix (NASDAQ:NFLX) seven years to accomplish.

Disney was able to hit the streaming jackpot, thanks to shows like Hamilton and The Mandalorian. Both shows garnered a massive fanbase and took the streaming platform to new highs. Disney plans to capitalize on the success of its fame and has big plans to take its platform international next year.

Furthermore, the choice by Disney to premiere original movies on its streaming platform also helped ensure its success. For example, Disney’s highly anticipated film, Mulan didn’t make it to theaters this year because of the pandemic. But while this was a setback for the company, the premier on Disney+ allowed it to adapt and mitigate losses.

While Mulan faced its fair share of political backlash in countries like Hong Kong and Taiwan, Disney stated that it was very pleased with the results. From Sept. 1 to Sept. 12, 29% of Disney+ users purchased the movie. This is an impressive number given that there are 60 million users on the platform.

As the pandemic continues, theatres will continue to struggle to fill their seats. Christopher Nolan’s film, Tenet, offers a clear example of this. The film only earned a mere $20 million dollars in the U.S. box office this month, confirming the sentiment that Americans are not ready to hit the theatres just yet.

But with streaming platforms taking over the entertainment world, Disney+ is expected to become a major profit-generator for Disney in the coming years. That should help fortify the longer-term case for Disney stock.

Disney Reopens Its Hong Kong Parks

Although Disney is most well known for its cinematic entertainment, its business is multifaceted. One of Disney’s biggest and most successful businesses prior to the pandemic was its theme parks. Its local and international parks saw an estimated 156 million visitors in 2019. But with social distancing rules in place since the start of the year, Disney was forced to shut all its parks.

However, in what seems to be a glimmer of hope in an otherwise dim business segment, Disney reopened its park doors in Hong Kong on Sept. 25. This decision came after a steady decline in cases in the region.

Out of 2 million tests administered in Hong Kong this month, only 42 cases came back positive. This led city officials to relax Covid-19 restrictions and allow businesses to reopen while abiding by new social distancing rules. Hong Kong Disneyland will remain open for five days a week with limits on park capacity and additional safety measures in place.

Disney may only have a minority stake in its Hong Kong park, but the reopening of Disneyland in the region is still great news for the company. Although it may take a while for its parks in the U.S  to follow suit, the ability to operate in a “new normal” — just as it has in Hong Kong — is an encouraging sign for investors.

The Bottom Line on Disney Stock

Disney is an entertainment powerhouse and despite a rough start to 2020, the company has remained resilient to the effects of the pandemic. In my opinion, Disney stock will remain a strong buy in any investing environment because of its diverse business model and ability to pivot based on its customers’ needs.

Disney+ may not yet be the massive needle-mover many expect, but it is well-positioned in the streaming market to generate some stellar returns in the next few years. Moreover, the company’s parks business will slowly but surely reopen and eventually adapt to the new normal. With Disney ready to take on a new fiscal year, analysts remain confident in the entertainment giant’s ability to make a strong comeback.

It would be wise to stay invested in Disney stock despite the dip this year.

On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.

Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/disney-stock-is-this-years-streaming-war-winner/.

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