Disney Corporation ($DIS) Is Short Term - Short
Disney hit a 52-week high of $153.41 in November 2019 and has a 52-week low of 107.32 in March of 2019, closing Friday, March 6, 2020, at $115.27. The coronavirus took its toll with Disney having to close theme parks in China and Japan. According to NBC News, “Shanghai's $5.5 billion Disney Resort and Hong Kong Disneyland both closed indefinitely on Jan. 26, which Disney said would ding its bottom line by $175 million.
In Japan, the two Disney-branded theme parks in Tokyo are closed until March 16 as a precaution against the spread of the coronavirus.” With the coronavirus making its rounds in the US, potential headwinds are starting to stir.
In China the cases peaked in February 2020 and then it’s steadily declining. The problem is believing any data coming out of China. If the virus does run a similar pattern in the US, then next month it should peak and slowly decline the following month.
The virus will cause more Americans to stay at home and avoid large gatherings like theme parks and movie theaters. This could mean Disney’s upcoming big summer blockbuster Mulan, which is due to be released March 27, could be pushed back or materially hurt.
Overall Disney is set to release four movies between now and June, right when the virus should be at its peak. On the bright side, people staying at home may be more tempted to sign up for Disney+ rather than venture out. However, that will not be enough to help Disney’s Q2 results, at some point they may release a statement warning the company will not meet its guidance. That could even cut into Q3 and then affect its full year results. In the short-term Disney will take a hit, with the 52-week low of 107.32 as a targeted bottom.
The stock has shown support around the $110 to $115 level during this past trading week. That will change as more news of the virus spreads and people become more reluctant by delaying already booked trips to Disneyland or Disneyworld. Plus, those who were in the planning stages of booking a trip will delay or even decide not to go.
Many investors believe the virus is a short-term headwind, so Disney’s stock won’t remain suppressed forever and at some point the market and Disney’s stock will bounce back. The next 4 weeks will be interesting and should push Disney’s stock lower in the short term.