The coronavirus crash spared almost no stock.
Growth stocks and value games, pillars and start-ups, they all fell as the market experienced its fastest correction ever, falling more than 10% from its all-time high in just six sessions.
Among the stocks that fell, Walt disney (NYSE: DIS). The generally stable entertainment giant is down 14% since February 21 and has fallen more than 20% from its record level in November. For a reliable profit machine like Disney, this is a substantial drop.
However, it is easy to see why the stock fell. Its three theme parks in Asia are now closed. Much of its resort business remains threatened by the coronavirus epidemic, which has hit the travel and tourism industries, and investors are also nervous after the surprise announcement that CEO Bob Iger is stepping down.
However, Disney stock is starting to look unreasonably cheap, as investors seem to have forgotten the positive catalysts that pushed it to a record just a few months ago. Let’s take a look at a few reasons why Disney’s stock has just bottomed out.
1. Disney + is about to launch in Europe
So far, Disney + has won over investors and consumers. The service, which is stocked with Disney classics, content from Pixar, Star Wars, Marvel and National Geographic, and new programming like The Mandalorian, had already registered nearly 30 million registrations as of February 4, almost all in North America.
The service will launch in Western Europe on March 24 and will hit the UK, France, Germany, Italy, Spain, Austria, Switzerland and Ireland. These countries have more than 300 million inhabitants, a population similar to North America. This could give Disney + a chance to double its membership. It’s a safe bet that the launch will be a success similar to that of the United States last November, because Disney is a truly global brand. Such a European debut would rekindle the enthusiasm of investors that Disney + aroused when the company first announced the service last April and when it revealed that it had 10 million registrations when it launched in November. .
Keep in mind that Disney initially targeted 60 to 90 million subscribers worldwide by 2024. A successful launch in Europe could put the company on track to reach the bottom of this range by the end of this year.
2. The news from Iger is exaggerated
In the worst market week in a decade, Disney poured gasoline on the fire by announcing that CEO Bob Iger, who has guided the company since 2005, will immediately step down to be replaced by Bob Chapek, chief from Disney Parks, Experiences and Products. business.
Iger is one of the most respected leaders in the business world. Under his leadership, Disney became the monster it is today through a series of savvy acquisitions, including Pixar, Marvel, the owner of Star Wars Lucasfilm, and most recently Fox. Iger also laid the groundwork for the successful launch of Disney + and opened Shanghai Disneyland.
The announcement took the investor world by surprise, and Iger’s decision to leave the CEO “immediately” raised the suspicion that there was another problem at stake here. However, this does not appear to be the case. Iger’s retirement had already been delayed for years while he was taking steps like acquiring Fox and launching Disney +, and he will stay with the company throughout next year in as executive chairman and to direct the “creative efforts” of the company. In a call to an analyst to discuss the decision, Iger said he made the decision because the creative side of the business will become the company’s top priority next year, now that the plan future growth is in place with the acquisition of Fox and the launch of Disney +.
3. Parks will reopen
No one knows how long the coronavirus epidemic will last or how far it will spread, but one thing is clear. This is a temporary problem. Disney parks closed in Hong Kong, Shanghai and Tokyo will reopen. In fact, there are already signs that life is starting to return to normal in China. Starbucks reopened most of its closed stores, and Apple said the factories it relies on are back up and running. As a result, Disney’s Chinese theme parks may soon reopen as well. The Tokyo complex, meanwhile, is slated to open on March 16 after it is closed in response to a request from the Japanese government.
Disney has warned that the park closings in Shanghai and Hong Kong could wipe out $ 280 million in operating profit in its second fiscal quarter. It’s a large sum, but in the long run, it’s important to remember that the virus is a temporary headwind for the business, and Disney will bounce back. Indeed, the reopening of its parks could serve as a catalyst for the recovery of the stock.
Disney is almost a century old, has a diverse range of businesses, and its portfolio of brands is second to none in entertainment. It will overcome the coronavirus, and when it does, the stock will almost certainly be higher than today.