Cowen analyst Doug Kreutz downgraded Walt Disney shares Thursday, reduced earnings estimates and cut its price target on the stock anticipating a more prolonged impact on parks and resorts as the spread of COVID-19 accelerates in the U.S.
Walt Disney World reopened at limited capacity last weekend amid the surge. Kreutz said he thinks there’s “a meaningful probability” that the park could be forced to close again or at best continue to operate with severe capacity restraints until at least mid-2021. Disneyland in Anaheim remains closed.
With earnings season kicking off today for media and entertainment, Wall Streeters are reviewing their numbers in a constantly shifting business climate buffeted by COVID-19. Disney reports quarterly results on August 4.
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Kreutz, who, like many others, initially calculated the spread of the virus and subsequent social distancing requirements would have trailed off significantly by the end of this year, said he now sees pandemic restrictions in effect at least until the middle of next year. “The situation remains very fluid and we do not rule out the possibility that the impact could last even longer,” he said in a note.
New U.S. COVID-19 cases are now in the 60,000 a day range, double the interim peak reached in early April, he noted, with Florida and California, home to Disney’s two domestic theme parks, accounting for about 33% of new cases.
Separately, he said he doesn’t expect any new releases from Disney (or other studios) this year and only a modest slate in 2021. That’s because he now thinks domestic theaters may be largely closed until mid-2021 and studios won’t be interested in releasing their largest movies into a capacity-constrained footprint. Currently the nation’s largest exhibitor AMC Entertainment is planning to reopen where it can on July 30. Cinemark has set a July 24 date. Disney’s Mulan, which shifted its release date three times, is now slated to hit theaters on August 21.
Opinions on the sector vary widely. An exhibition analyst yesterday offered a contrary opinion, saying the ongoing disruption — and concern over the survival of the exhibition industry — means studios could be more likely to start releasing films this year instead of waiting for a “perfect” release date that may never come.
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