If you’ve been following the Disney news recently, you may know that Disney stock prices have been on a bit of a rollercoaster ride.
In the past few weeks, Disney stock prices have been surpassed by Netflix only to quickly bounce back with the announcement of Disney+’s success. Now, they’re falling once again as Disney contends with the potentially lengthy projected closure of its theme parks.
So is Disney defunct? Hardly. You probably don’t need to worry about those prices, and we’ll tell ya why. Read on!
Disney is Making Major Moves to Protect Their Financial Assets
First off, Disney isn’t helpless when it comes to their financial situation. They’ve seen the warning signs and are feeling the impact of the loss in revenue from the theme park closures and film release delays. As a result, the company is making some major moves to protect its financial assets.
Disney has ceased most non-essential construction in the theme parks, even though some projects could have continued with increased health measures. This is a money-saver at a time when the company revenue has been drastically reduced. On top of that, the furloughs of Cast Members and executive pay cuts have further decreased their costs.
Executive Chairman Bob Iger has even referred to these labor cuts as a financial measure, saying they were for the company’s long-term preservation. Essentially, Iger recognizes that these decisions were difficult and will leave lasting impacts on their employees, but that they’re intended to protect the future of the company.
And these labor suspensions aren’t the only things Disney has done in an attempt to protect their financial health. Already, the company has taken out more than $11 billion in loans to help hold them over until the company is once again fully lucrative.
It might seem like a surprising spend, but land represents a tangible asset as opposed to the vulnerable intangible capital that Disney is attempting to protect. So, it’s safer from economic ups and downs! Disney has done what they can to rearrange and limit their line items so that their financial future is secure.
Disney Has Enough Capital to Face the Financial Downturn
On top of all of those measures, Disney has enough capital to cushion the financial downturn. In Iger’s own words they “have access to capital that will keep [them] more than solvent through a prolonged period.” As Disney stocks fall, they’ve got the finances to catch them for a while.
And Disney execs aren’t the only ones who expect that the company has the ability to manage any financial shortcomings. J.P. Morgan analyst Alexia Quadrani said of Disney, “I have a huge degree of confidence in their ability to endure this crisis. This is a top-notch management team…I’m very convinced this is an outperformer in the long term. They have the best content. They have a fantastic flywheel in terms of assets.”
Such a disruptive time for Disney’s business model does inevitably affect stock prices, however, as the world returns to normalcy — Disney should be able to bounce back. Executives and analysts agree that there is little to no danger of Disney being unable to recover.
Disney Offers Value to Consumers That Will Continue When Normalcy Returns
Finally, Disney offers perceived value to consumers and even though some of that value is on pause for now, it will return as the world recovers from the global health crisis. Analysts have noted that a comeback for Disney isn’t really a question, as soon as health concerns allow for one.
Quadrani noted that there is tremendous pent-up demand for the theme-parks and Credit Suisse analyst Douglas Mitchelson explained that his team on Wall Street expects “a full rebound in theme park and Hollywood operations over time.” All Disney has to do is weather this temporary downturn.
Iger notes that the Disney team is made of optimists and realists. They are holding on to the hope and expectation that when this situation ends, Disney will still have something for people to enjoy and appreciate, maybe “more than they ever have.”
So yes, a downturn in Disney’s stock prices might be alarming for the time being, but it seems there’s little cause for worry about the company’s value in the long run. Between Disney’s preventative measures, established capital, and value prospects for the future — the company is well-equipped to handle the challenges and fully recover in time. We just may see more rollercoaster stock changes from Disney until this all levels out.
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What are your expectations for the future value of Disney stock prices? Share your thoughts in the comments!