Perhaps one of the surprise, and non-intuitive aspects of the stock market after a bear phase is that it can be the companies who were most hit by the downturn whose share price recovers best. This may be what we are witnessing at multimedia and entertainment giant Disney, as well as affecting the Disney share price.
The company’s flagship theme parks were in the firing line of COVID-19 lockdowns. Therefore, it was not surprising that from a December 2019 peak of $153 we saw the Walt Disney share price almost exactly halve by March, as investors fretted over the prospects for the pandemic Achilles Heel of Disney’s fundamentals, its theme parks.
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Disney shares: Q4 update
The latest update from Disney had most eyes looking at the performance of its parks business, the area directly in the firing line as far as the pandemic is concerned. Fortunately, for Disney shares we have not seen a total closure across the board, as could have been the case. Instead, the sporadic closures and now limited opening have had a partial impact on the performance.
Year on year revenue for Disney’s parks was down 61%. However, it could be that the greatest barrier to recovery, despite the cost savings, was laying off 28,000 workers. This will undoubtedly slow any fundamental rebound, even if the recent double vaccine boost from both Pfizer and Moderna mean that a return to normality in the hospitality and travel sectors arrives sooner than is currently expected.
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The first loss in 40 years for Disney shares
Given the way that hospitality and leisure have been the greatest losers in the economy, it was always going to be the case that Disney shares would be seriously affected by the pandemic. The first annual loss in decades was perhaps not a surprise even though it served up shock value. The most interesting aspect though, is how much the parts of Disney not affected by social distancing have continued to contribute.
Going forward, it will be these parts of Disney which will determine whether the recovery we have seen in DIS shares from below $80 to nearly $140 is justified? Indeed, $6.9bn of the $7.4bn loss for the fiscal year came from theme parks and associated businesses.
Vaccine gains for the DIS share price
The double vaccine news seen in the recent past from Pfizer and Moderna contributed to some 20% on the Walt Disney share price. Although the initial squeeze in the wake of Pfizer’s news ahead of the Q4 update three days later was the most spectacular. The explanation for this is it gave investors their first credible glimpse of a post pandemic world and a return to normality.
However, as is normally the case with the stock market, it is notorious for jumping the gun in terms of either downturns or upturns. Therefore, in the case of Disney shares, while theme parks may have dominated the downturn, it could be that the leader ahead of COVID-19 vaccines doing their job will be the direct to customer business.
Disney+ to drive Disney shares
The good news is that Disney+, its media streaming service to rival Netflix and Amazon Prime was already on the runway as COVID-19 hit. From a standing start it is now up to 73 million subscribers, as compared to Netflix at 195 million subscribers. It may very well be the case that should Disney+ continue to grow, the Disney share price will be supported more by this than the re-opening of theme parks in 2021.
How to trade shares with ATFX
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1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for Disney shares in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade
DIS share price daily chart
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