Disney Town in Shanghai.
Photograph by Hu Chengwei/Getty ImagesWalt Disney stock jumped Friday morning after the company announced that Disney Springs—an outdoor shopping, dining, and entertainment complex outside of Disney World Resort in Orlando, Fla.—will begin a phased reopening starting on May 20. The rest of the Disney World Resort, including theme parks and resort hotels, will remain closed, the company said.
The announcement came as the company’s theme park in China—Shanghai Disneyland—is busy preparing for a reopening on May 11 after a four-month shutdown. Tickets for the reopening—although with limited capacity under government regulations—sold out in minutes after bookings started Friday 8 a.m. local time, a sign that Chinese consumers are ready to pull out their wallets for the entertainment giant as the nation recovers from the coronavirus pandemic.
Disney’s (ticker: DIS) Shanghai resort has already had a phased reopening since March 9 with limited shopping and dining experiences, about two months before the theme park’s announced reopening date. The company is keeping its parks in Japan, Hong Kong, Paris, and the U.S. closed.
With the global pandemic shutting down theme parks, movie theaters, and sports events, Disney earnings for the first quarter were down a whopping 93% from the year-ago period, the company reported earlier this week. Theme parks are a key pillar of Disney’s earnings, bringing the entertainment giant over $6.7 billion in operating income—about 45% of the total—during fiscal 2019, which ended last September. The segment saw a 10% year-over-year decline in revenue and a 58% drop in operating income for the first quarter.
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Disney already has extensive experience from the reopening of Shanghai Disneyland and has had more time in such preparation for domestic parks, wrote J.P. Morgan analyst Alexia Quadrani in a Friday note, adding she expects Orlando’s Disney World to welcome visitors again as early as July 1. Quadrani noted that even with its doors closed, Disney World is currently booking reservations for as early as June 1, while Disneyland in Anaheim, Calif., is booking them beginning July 1.
The question now is how many consumers are willing and able to visit the theme parks once the doors are opened. Shanghai Disneyland is limiting visitors to one-third of its normal capacity—about 24,000 visitors a day. Orange County in Florida, where Disney World is located, has recommended 50% capacity initially, said Quadrani.
The U.S. is still seeing more than 20,000 new coronavirus cases every day. Fears over the pandemic persist, and airlines continue to cancel flights or fly with limited capacity. Still, things might be different two months from now, and any reopening of the parks would be financially beneficial for Disney, wrote Quadrani, as even low capacity can help offset the fixed cost base.
“These developments reaffirm our positive thesis that the reopening of Shanghai Disneyland is the first in several catalysts ahead, and we reiterate our Overweight rating on Disney shares,” Quadrani wrote. She has a $135 target price for the stock.
Both Disney Springs in Orlando and Shanghai Disneyland are implementing a series of safety and health measures to prevent virus spreading, including requirements for face masks, temperature screenings, frequent sanitization and disinfection, and social distancing in restaurants, lines, and elsewhere.
Disney stock was up 1.9%, at $107.53, in recent trading. The S&P 500 was up 1.1%.
Write to Evie Liu at evie.liu@barrons.com
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May 08, 2020 at 09:50PM
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Shanghai Disneyland Tickets Sold Out in Minutes. Disney Stock Is Rising. - Barron's
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