When this year began, Disney (NYSE:DIS) had established itself as a media and entertainment giant with no equal. Its film franchises, which include the Marvel Cinematic Universe and Star Wars, had thoroughly dominated the box office in the late 2010s. The COVID-19 pandemic has plunged the movie theatre industry into a deep crisis, while Disney’s lucrative theme park empire has been forced to close its doors.
Shares of Disney have dropped 15% in 2020 as of close on October 29. The company is set to deliver its fourth quarter and full-year 2020 results in early November. Should investors consider buying the dip at Disney?
In the second quarter, Disney saw revenues plunge 42% year-over-year to $11.7 billion. The company posted a $4.8-billion loss. Total segment operating income fell 72% to $1.09 billion.
Disney’s Parks, Experiences, and Products segment took the biggest hit in the second quarter. Revenues in this segment dropped 85% year-over-year to $983 million. Meanwhile, revenues in its Studio Entertainment segment fell 55% to $1.73 billion.
There will be little respite for either segment to close out the year. The COVID-19 pandemic has forced layoffs at Disney’s theme parks and movie theatres are in major financial distress. Disney will struggle in both areas until a vaccine allows a return to normality.
Disney still has a shot at big growth down the line, but the stock looks overvalued in late October. I’m staying away from Disney as it battles this crisis.
