Disney Stock (NYSE: DIS) Rallies Into Park Reopening

It’s been touch and go for several weeks but on Saturday, The Walt Disney Company (NYSE: DIS) officially reopened its Walt Disney World theme park in Orlando after months of coronavirus driven closure. Even though the number of guests allowed in was limited and tightly controlled, there are still many who thought the move was a little premature given coronavirus cases in Florida continue to surge.

These concerns haven’t filtered through to the company’s shares, which are up 10% since the start of the month and more than 50% since the middle of March when the situation was at its most bleak. Disney has tried to strike a balance between restarting one of the core revenue streams while also trying to avoid the PR disaster that would happen if a cluster of infections is traced back to its parks. To this end, they’ve implemented new safety measures such as mandatory face coverings, extra hand sanitizers, and regular temperature checks.

Will They, Won’t They

The Orlando theme park’s reopening will serve as a litmus test for the company’s other parks as well as the broader US economy. Their California based Disneyworld park was due to reopen next weekend but those plans have been placed on hold indefinitely as the state reels from the second wave of coronavirus. In recent weeks, pressure had been mounting on the company to hold off on all reopenings and eyebrows have certainly been raised at them pushing ahead this past weekend.

Indeed, at the end of last month, Disney succumbed to pressure to delay the release of their Mulan movie which had been viewed as a bellwether for the cinema industry’s reopening. It will be interesting to see how Wall Street digests the latest developments and efforts of a company whose stock was trading at all-time highs before coronavirus and is clearly eager to get back to them.

Unsurprisingly, along with cruise ships and airlines, theme parks like Disney, Six Flags (NYSE: SIX) and Cedar Fair (NYSE: FUN) were among the first casualties of the pandemic. Disney’s stock lost almost 50% of its value in less than four months, as cinemas were shut, cruises were canceled and parks were closed. The company takes in most of its revenue from these business lines so investors weren’t waiting around. More than 100,000 of their employees were furloughed and $5 billion in fresh debt was issued to help them ride out the storm. Still, with shares at the lows, investors' worst fears were confirmed when revenue for the first three months of the year fell 90%.

Light At The End Of The Tunnel

But things have been getting steadily brighter since then. Of their 11 theme parks which were all shut, the Disneyland park in Shanghai was the first to reopen in May. This positive development was added too as paid subscribers to Disney+ crossed the 50 million mark last quarter. Management will be hoping that most of these stick around once things return to normal. With a solid business model in play before the pandemic, there’s every reason to think that the company will be back to its winning ways once we’re through the other side.

There’s a 1.5% dividend yield to keep investors happy in the meantime as well as a sense of value even as shares continue to recover. They’re still trading around 2015 levels in a range that the company had only managed to break through last summer. It might not be a smooth ride for the next few months, but it’s hard to argue that Disney won’t eventually be back to all-time highs and investors will look back at these levels as a gift of a buying opportunity.