Reopenings, NBA Deal Should Boost Disney Stock
The Walt Disney Co. (NYSE: DIS) continues its slow but steady recovery from the coronavirus pandemic. The entertainment company’s stock has rebounded nicely from March, when it was trading below $100.
On Monday afternoon, Disney was trading at around $125. The stock is up 16% in the last month, and nearly 20% for the past three months. Year to date, Disney shares are down 13.5%, compared with the S&P 500, down 0.6%.
Stock market analysts give Disney an average 12-month price target of $126.70. From a pool of 25 analysts, 13 recommend that investors Buy Disney, 11 say Hold and one says Sell.
Bullish analysts say the reopening news reiterates the long-term value of Disney. “Its balance sheet is very good, it has good net interest coverage, it has access to debt, and it definitely is a survivor,” said Gina Sanchez, CEO of Chantico Global, in a recent interview with CNBC.
Anticipation over theme park reopenings is driving investor interest. Those parks and resort properties account for about 40% of Disney’s revenues. The company’s streaming services division has been a lifesaver during the pandemic.
Magic returns to the Walt Disney Kingdom next month when its famed Florida parks reopen to visitors. Expect great fanfare and media reports of those first excited visitors that rush through the gates.
Disney’s Magic Kingdom and Animal Kingdom plan to open again on July 11. Separately, Disney’s Hollywood Studios and Epcot will resume business on July 15.
Some Disney resorts will open sooner than the theme parks. Next week, Disney Vacation Club properties in Vero Beach, Fla., and Hilton Head, S.C., will welcome guests again. The following week, Vacation Club properties at Walt Disney World and the Fort Wilderness Resort and Campground are scheduled to reopen.
As part of its reopening plans, Disney recently announced a slate of new policies and procedures to address COVID-19, including enhanced cleaning protocols. All high-touch surfaces, including elevators, railings and benches, will get extra attention. In resort hotel rooms, high-touch surfaces such as handles TV remotes will be subject to extra sanitization techniques. Floors will be steam cleaned.
To avoid interaction with cleaning staff, only light room cleaning will be offered, every other day. At the Vacation Club properties, cleaning will be offered on the fourth and eighth day of guest stays.
For the theme parks, the company recently published a list of “top things you should know” before visiting. The list includes the new requirement that all guests aged 2 and up must wear face coverings. Masks are expected except when dining or swimming.
Temperature screenings will be required at some locations prior to entry. Some park experiences will be unavailable or modified “to allow for physical distancing and limited contact.” Anyone with a temperature above 100.4F will be denied entry.
Disney is encouraging contactless payment, including MagicBands, which allow Disney Resort guests to charge items to their hotel folios. All visitors are encouraged to use the My Disney app on their phones. Using the app, guests can view restaurant menus, place mobile food orders, and bypass hotel front desks through the online check-in feature.
The U.S. parks are implementing procedures first rolled out at Shanghai Disneyland, which reopened in May at 20% capacity. In California, the company still hasn’t announced a reopening date for Disneyland. For a clue, the three Disneyland resort hotels recently pushed back the first date for which they are accepting new reservations. Guests can’t reserve rooms prior to July 15, according to The Orange County Register.
Theme parks can reopen under Stage 3 of California’s reopening road map. The state will declare Stage 3 after COVID-19-related hospitalizations and new infection rates stabilize.
Will all these rules turn off some Disney fans? Perhaps. But there’s also surely a pent-up demand to return to the parks, which have been closed since March. And without a vaccine, masks and social distancing are the new normal. A Credit Suisse analyst recently noted pent-up demand for vacations as a positive for Disney stock.
Florida will be the center of another event that should help Disney: the return of National Basketball Association games. Last week, the NBA board of governors voted to approve a relaunch of the 2019-2020 season.
In a unique solution to challenges presented by COVID-19, the NBA is centering its revived season in Orlando. Twenty-two teams will converge on the 220-acre ESPN Wide World of Sports complex for a series of games and a modified playoff series.
Having all the games in Florida minimizes travel, and therefore risk, for the teams and staff. There will be no fans in the audience, which will surely take some getting used to.
Teams are expected to stay at Disney properties, which could put some pressure on room reservations for theme park guests who wish to stay in Disney hotels. But the theme parks will be operating at reduced capacity, so some of those rooms likely would have been empty.
To avoid potential COVID-19 exposure, players and any accompanying family members will be expected to stay inside the “Disney bubble” throughout the season. Players will also be tested frequently.
NBA finals normally would have concluded this month, but play will now resume in Orlando on July 31. This will be welcome news at Disney-owned ESPN, which has lacked live sports events to broadcast.
Disney and NBA are close partners, with Disney paying $1.4 billion a year to broadcast games on ESPN and ABC, according to The New York Times. Analysts expect huge viewership numbers once the games start. Disney surely hopes the advertisers will come back to grab those hungry audiences.
The NBA finals are now scheduled to conclude in October, with training for the next season to start a short time later. Media reports suggest the NBA may allow fans back into games next season, just spaced out with a fair number of empty seats.