Disney Stops Paychecks for Over 100,000 Employees

Walt Disney Co. (NYSE: DIS) shares sank on Monday after it was reported that the Mouse House would stop sending paychecks to more than 100,000 employees. While most companies are tightening their belts during this coronavirus pandemic, Disney looks like it’s buying a new belt.

Previously, Disney said that it would furlough certain nonessential U.S. employees beginning on April 19. The company also urged its employees to apply for the extra $600 a week that is available through the government’s economic stimulus plan.

This also comes after Disney found a new credit agreement with Citigroup for up to $5 billion to help hold the company over through this shutdown.

UBS’s John Hodulik downgraded Disney to a Neutral rating from Buy and lowered its price target to $114 from $162, implying an upside of 7% from the most recent closing price of $106.63.

Overall, UBS believes that the profitability of Disney’s theme parks segment will be impaired for a longer period, considering the lingering effects of the outbreak. The base case puts an opening date for the parks on January 1, 2021.

Hodulik also noted that the economic downturn in conjunction with new health precautions, a lack of travel and crowd aversion are likely to make business less profitable until a vaccine is widely available. This in turn will push earnings lower.

Disney stock traded down about 3% Monday morning to $103.40, in a 52-week range of $79.07 to $153.41. The consensus price target is $133.38.

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