Ever since the announcement of travel restrictions imposed by governments across the globe, Disney’s stock (NSYE: $DIS) has suffered catastrophically and reached its lowest point in over five years.
Disney is known for not only generating revenue from parks, products, and media networks, but also from the experiences that it creates for both adults and children.
It is one of the most successful companies on the planet because of because of its diversified portfolio and monopoly over the region’s tourism market share.
This makes the company a powerful contender with strong revenue streams. However, the sudden travel restrictions have taken a toll on the company’s stock.
Although the company has permitted some of its parks to open, it will be required to allow a limited number of individuals while incorporating several restrictions which might continue revenue losses in this segment in the coming future.
In fact, the company stated the following during its second-quarter earnings:
“We estimate the Covid-19 impact on operating income at our parks, experiences, and product segments was approximately $1 billion primarily due to revenue lost as a result of closures”.
It’s also important to note that Disney accounts for a 70% market share of the region’s tourism market share and has previously welcomed over 58.2 million people. At the moment, this figure has been substantially lowered as a result of travelling restrictions.
Disney’s Media Networks segment will also receive lower advertising revenue if live sports do not resume, and ESPN did see a lower advertisement revenue as viewership declined.
Robert Johnson, a professor of finance at Creighton University has mentioned that the return to normalcy will take much longer since people will not be willing to fly over to crowded theme parks. Hence, it will take a longer time for Disney to recover from its losses.
However, the revenue from Disney’s streaming services and video games has slightly increased as the typical consumer is moving towards internet based streaming services.
Despite the current circumstances, IBR sees a bright future for the iconic entertainer and sees DIS share price exceeding the $150 level and even possibly reaching the $200 mark in the coming months.
Get long and enjoy the ride.
Now is the time, as restrictions ease up and consumer confidence levels increase.
You will definitely not regret in having Mickey Mouse and the rest of the gang in your portfolio.
P.S. – Interesting Book Recommendation: The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company by Robert Allen Iger.