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Disney (DIS) Shuts Theme Parks as Coronavirus Threat Looms

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Disney (DIS - Free Report) is down 36.5% year to date on concerns about lost profits from the lockdown of its theme parks due to the coronavirus outbreak.

The company is closing Walt Disney World, its flagship theme park resort in California and Florida because of the pandemic. Moreover, Disney announced the closure of Disneyland Paris and the suspension of all new departures with the Disney Cruise Line starting Mar 15 through the end of the month, per a Reuters report.

The rising incidences of coronavirus, which is now officially designated as a pandemic by the World Health Organization (WHO), prompted several countries to place the worst-hit cities under lockdown to contain the virus.

Coronavirus Threatens Disney’s Top-Line Growth

Disney’s top-line is expected to take a hit as tourism plummets. The company has temporarily shuttered all eleven theme parks across North America, Asia and Europe, which are significant growth drivers. Notably, three of its Asian parks– Disney Shanghai, Disney Hong Kong and Disney Tokyo have been shut down.

Disney generated more than $26 billion in sales at its Parks, Experiences and Products division in fiscal 2019, representing 37% of the company's overall revenues.

Disney expects second-quarter fiscal 2020 operating income to be negatively impacted by park closure in Shanghai and Hong Kong due to coronavirus. While the Shanghai closure is expected to hurt operating income by $135 million, Hong Kong’s closure will result in a negative impact of roughly $145 million.

The Walt Disney Company Price and Consensus

The Walt Disney Company Price and Consensus

The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote

Moreover, Disney’s movie business is also expected to be interrupted as movie theaters have been closed in key European and Asian markets.

Nonetheless, Disney has been making big moves to transition its business model to one that is more sustainable. The launch of its streaming service Disney+ reflects this transition.

Disney+ to Gain From Coronavirus-Led Lockdown

Disney’s direct-to-consumer offering, which now includes Hulu, ESPN+, and Disney+, are becoming must-have services for consumers’ portfolio of streaming platforms.

The increasing number of lockdowns globally is expected to further increase consumption of media content over the Internet, giving the newly released Disney+ streaming platform a chance to prove its in-home entertainment worth.

Notably, Disney is set to launch Disney+ in India through the Hotstar service on Mar 29. The company will launch Disney+ in several international markets, starting with Western Europe on Mar 24.

Recently, Disney signed an agreement with Comcast (CMCSA - Free Report) owned Sky to carry its service on Sky Q and Now TV in the UK and Ireland ahead of Disney+’s UK launch on Mar 24.

Notably, Disney+ has gained 28.6 million subscribers since its November 2019 launch. It is predicted to hit 126 million subscribers worldwide by 2025.

The growing popularity of Disney+ makes it a key growth catalyst owing to a strong content portfolio and a cheaper bundle offering.

The streaming service will release season 2 of The Mandalorian in October, 2020. Additionally, a new Marvel adventure, The Falcon and the Winter Soldier, begins in August. Moreover, a 10-episode series based on The Mighty Ducks movie, with Emilio Estevez and Lauren Graham also premieres later this year.

The company’s solid content portfolio and global expansion is not only expected to contribute to subscriber addition but also offset stiff competition from the likes of Netflix (NFLX - Free Report) , Amazon’s (AMZN - Free Report) Prime video service, Apple’s Apple TV+, AT&T’s upcoming HBO Now, and Comcast’s upcoming Peacock.

Disney currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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