Disney: A Powerful Entertainment Company despite the Pandemic

Disney: A Powerful Entertainment Company despite the Pandemic

A Brief about the Company

Formally established in 1929, Disney is one of the earliest American corporations in the film production industry. Headquartered in Burbank, California, it has become the best-known source of family entertainment in the 20th and 21st centuries.

 

Fundamental Analysis

  • Disney has recently unveiled its Magic Key Program for Disneyland visitors in Anaheim, California. The Magic Key replaces the park's annual pass that was canceled in January due to the continued uncertainty of the pandemic.
  • There have been some positive developments in the parks’ progress, such as the opening of Disneyland in May and the Shanghai Park operating above 2019 levels in the second quarter.
  • Disney+ added more than 100 million subscribers in less than a year and a half, and the company is expecting it to grow to 260 million by 2024.
  • Walt Disney Co. discussed the financial results of the fiscal Q3 2021 on 12 August, 2021, after the close of the regular daily trading session. The results showed strong positive earnings of  USD 0.8 per stock, in comparison with the expectation of USD 0.55.
  • Disney’s revenue is forecast to increase by 43%.
  • The company followed an interesting strategy for film premieres and distribution during the pandemic, as low-key releases were available on the Disney+ streaming service right away, which contributed to the popularity of the platform.



The Outlook


On 6 August, 2021, the U.S. Bureau of Labor Statistics Office released the July jobs report, which showed positivity in the American economy, where it added 943,000 jobs, compared with the expectations of 870,000.


According to the report, the film and music production industry recorded a 17.8% change in July, which is a very positive sign to reopening soon! But still, we should put in mind the delta variant now, which could be harmful to Disney’s future operations.


Through the pandemic, Disney remained one of the most powerful entertainment companies in the world, and it has managed to stay profitable while sales have decreased according to the 2020 annual report, which stated that the service revenue for fiscal 2020 decreased by 2%, by USD 1.3 billion to USD 59.3 billion. This was driven by the low volume of theme parks and low revenues of resorts and cruise lines. The fall was also due to a decrease in revenue of theatrical and stage play distribution, as well as lower revenue of advertising and sales of third parties television and film programs.


These decreases were partially offset by the consolidation of TFCF – the company acquired by Disney on March 20, 2019 – and Hulu, in addition to an increase in subscription revenue from Disney+ and Hulu.


This information made financial analysts around the world more optimistic about the forecast of Disney’s stock, as they are anticipating a price range of USD 212 to 230 in the mid-long term.

 

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