Clearly, COVID-19 has been very damaging with an unquantifiable impact across Disney’s (DIS) business segments. Disney has had to shutter all of its worldwide Parks and Resorts. ESPN has been hit with the cancellation of virtually all sports worldwide. Advertising revenue coming through its media properties has been hit as companies scale back ad spending. All of its movie studio productions have been halted, and movie releases postponed. Despite these headwinds, Disney’s streaming initiatives have been major growth catalysts for the company. Disney+ has racked up over 50 million paid subscribers in just five months, Hulu has 30 million paid subscribers, and ESPN+ has 7.9 million paid subscribers. Disney+ has been wildly successful via unleashing all of its content (Marvel, Star Wars, Disney, and Pixar) in what has become a formidable competitor in the ever-expanding streaming wars domestically and internationally. Hence the tug-of-war on Wall Street between the COVID-19 induced negative impact and the success of its streaming initiatives in terms of valuation. The stock is selling at a steep discount of ~30% from its highs of $151 per share. At these reduced COVID-19 levels, Disney is a compelling buy as its legacy business segments get back on track in conjunction with these successful streaming initiatives.
As economies around the world reopen and certainty washes over the COVID-19 landscape, Disney’s business segments will regain their health. Parks will reopen as seen with Disney Shanghai, movie productions will resume, movie theaters and resorts will reopen, and sports will inevitably play-on. The resumption of all of these activities will feed into Disney’s legacy businesses. Disney continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and acquired full ownership of Hulu, and the company is launched its Disney branded streaming service with great success. I feel Continue reading "Tug-of-War: Disney Streaming vs. COVID-19"