Disney shares cooled off after a hot start to the week, dipping about 1.6% today to close the trading session at $149.08.
Even with the slight retreat, though, the stock has fully recovered to pre-Covid-19 levels in a remarkable comeback that has a chance of continuing through the holiday season. The eyes of Wall Street and the media and entertainment world will be trained on Burbank on December 10. That’s when the company will reveal a host of projects and strategic plans at a major online investor presentation. A previous such event, in April 2019, boosted the company’s stock 10% in a single day to a then-record high.
Last Thanksgiving, Disney stock was trading at $150.74. The company had just launched streaming service Disney+, which drew 10 million sign-ups on its first day. It has gone on to rack up 73.7 million globally, beating 5-year internal projections in just its first year. The movie studio was in between the worldwide box office triumphs of Frozen 2 and the final installment of Star Wars. ESPN was enjoying healthy college football ratings and looking ahead to the NBA playoffs.
Cue Covid-19. In the first weeks of 2020, it shuttered theme parks, cruise ships and movie theaters and halting sports, production and most TV advertising. At its lowest point in mid-March, Disney stock fell to $79.07 a share, less than half its value now.
The pandemic forced Disney to explore new options. Disney+ has become the primary distribution venue for major films, including Hamilton and Mulan, heralding more changes to the status quo. The effort to further monetize Mulan with a $30 upcharge appears not to have borne fruit, though CEO Bob Chapek said it was a worthwhile experiment and the company is not abandoning the “premier access” window. Rivals like WarnerMedia are taking similar swings, with Warner Bros’ Wonder Woman 1984 arriving on HBO Max and in theaters on Christmas Day, the same date Pixar’s Soul debuts on Disney+.
Of course, numerous challenges remain for Disney and its media peers even after theaters and parks reopen and coronavirus vaccines gain wide acceptance. Among them are the declining pay-TV bundle, which threatens assets like ESPN, and the economics of streaming, which promise less reliable profits than traditional models, though the role of third parties is lessened. Disney is also in the midst of an ambitious reorganization, centralizing distribution into a single organization with one P&L, a logic shift but one with immense complications in the executive ranks and the talent relations arena.
In sizing up the company’s quarterly earnings earlier this month, most Wall Street analysts looked past the tattered balance sheet and affirmed their optimism for 2021 and beyond. Guggenheim’s Michael Morris of Guggenheim was among many to raise his 12-month price target on the company’s shares, to $165 from $140. “While we expect a multi-year negative impact from COVID-19,” he wrote in a note to clients, “we believe investors will expect a recovery and as such will value shares on the company’s un-disrupted potential.”
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