By Emily Bary
Analyst wonders about COVID-19's 'lasting damage' on affiliate fees and TV advertising
Walt Disney Co.'s latest earnings prompted more questions than answers and left many dreaming about better days that could come years down the line.
Shares of the media giant (DIS) were off 0.4% in Wednesday morning trading after Disney saw earnings collapse by 90% as the pandemic pressured everything from theme parks to film production to television advertisements (). COVID-19 cost Disney at least $1 billion in profit just for its theme-park unit, executives sad.
While there's much uncertainty ahead, analysts lamented a lack of detail about the future coming out of Disney's earnings call.
"Of course we did not expect Disney to opine on timing of openings for Parks, theaters, sports, or content production," Bernstein's Todd Juenger wrote. "However, we had hoped for better clarity on Parks burn rate when closed, margin profile when opened at reduced capacity, operating rules/implications/parameters for operating in a pre-vaccine world."
Comcast Corp. (CMCSA) disclosed last week that a full quarter of closures for its Universal parks () could result in roughly a $500 million Ebitda (earnings before interest, taxes, depreciation, and amortization) loss for that segment.
Juenger said he "couldn't help feeling like we exited the call with more uncertainty than when we entered it." He estimates that Disney could lose $1.8 billion in revenue and $1 billion in earnings before interest and taxes for each month that its parks are shut down. He rates the stock at market perform with a $96 price target.
Wells Fargo's Steven Cahall wrote that Disney's parks problems are "still being fully understood." He estimates $3 billion a quarter in operating expense run rates, which Disney might be able to bring down to under $2 billion with furloughs and other cost savings.
"We don't think re-opening plans in Shanghai are super relevant to the US assets given China versus U.S. societies have very different standards around rules, regulations, testing and tracing," wrote Cahall, who has an equal weight rating and $107 target on Disney shares.
The company said it plans to reopen Shanghai Disneyland in China on May 11 with new rules around attendance, masks, and temperature checks.
MoffettNathanson's Michael Nathanson said that "the uncertainty index for Disney has never, ever been this high" in a note titled "Fast-Forward to FY2022." He argued that earnings for this year and even next year "have no real bearing" on Disney's stock price as investors seek to gauge how deep the impacts of COVID-19 will be on the business over a longer span.
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"The debate, for us, is about the duration of this downturn and the lasting damage it may have on key traditional drivers like affiliate fees, TV advertising and theatrical attendance," he wrote. "Furthermore, the lagging nature of U.S. theme parks, Disney's most important driver of free cash flow, means that we have to wait awhile to return to some normalization of financial metrics."
Nathanson rates the stock at neutral () with a $112 target.
Disney shares have lost 29% over the past three months as the Dow Jones Industrial Average has declined 19%.
-Emily Bary; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
May 06, 2020 10:13 ET (14:13 GMT)
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