Disney stock price on upward ride despite pandemic

SINCE late October, Disney has been forced to temporarily close its Paris theme park, moved Pixar’s high-profile Christmas release ‘Soul’ out of battered theaters to less lucrative streaming platforms and watched as profit over the holidays dwindled from US$2.1 billion the previous year to just US$29 million in 2020. The company also opened Disneyland as a vaccination site. In the same period, Disney’s share price has jumped 58 per cent, hitting an alltime high of nearly US$191 last week. It closed Friday at US$183.65, more than twice its price of US$86 from the first full week of pandemic shutdowns last March.

It has been a roller coaster year for Disney, figuratively if not literally. Many of its theme parks remain shuttered or at reduced capacity. But Wall Street has nonetheless taken the company on a significantly upward ride, buying shares in recent months at record rates. The company’s stock price has closed every day for the past 12 weeks above US$150. In the last 40 years, that had previously occurred only once.

The surge has elicited a range of analyst theories – from the growth of streaming service Disney Plus during the pandemic to an optimistic outlook about the windfall the company will reap after the pandemic ends. And while many remain bullish on Disney, they also gently ask whether the rally is based on too rosy a prediction.

“Nothing like the irrational exuberance of the markets,” Jim Nail, a technology and consumer-behavior analyst at research firm Forrester, said with a laugh when asked about the Disney buy-up.

Then he said, “I do think the first 3-6 months [of postpandemic life] will see a lot of people booking trips to Disney parks – there is a lot of pent-up demand, and that’s going to be a huge boost for the company.”

Whether that surge will benefit Disney’s other businesses remains uncertain, however. “It’s harder to make the case there will be a huge uptick in theater attendance,” Nail said. “People haven’t been going to parks. They’ve been watching new movies [on streaming] this whole time.” It was a year ago next week when longtime Disney chief executive Robert Iger surprisingly stepped down, replaced by the head of Disney’s theme parks, Bob Chapek. A few weeks later, the entertainment juggernaut had to halt park operations in much of the world because of the spreading coronavirus and shelve its theatrical release schedule because movie theaters around the world were closing.

Things looked bleak. After regularly taking in large sums every summer – the company recorded a post-tax profit of US$800 million in summer 2019 – Disney lost US$700 million in the summer of 2020. The theme-park division alone lost US$3 billion from April through September.

And after Disney’s 2019 theatrical releases banked $11 billion worldwide – more than half of which is pocketed by the studio – month after month went by in 2020 with barely any theatrical revenue. The company’s new releases in 2020 – ‘Onward’ and ‘Mulan’ – garnered just US$210 million worldwide.