A few short months ago, Disney (NYSE:DIS) seemed like an invincible juggernaut in the entertainment sector. It was coming off the heels of the launch of Disney+, which had surpassed 10 million subscribers on its first day. At the end of the fourth quarter of fiscal 2019, Disney+ had attracted 26.5 million subscribers.
In its Q4 report, Disney said that it expected to take a hit from the COVID-19 outbreak. However, at the time the magnitude of its impact on Europe and North America was not fully understood. It has become clear that this pandemic will have enormous and far-reaching consequences for Disney and the entertainment industry at large.
Disney stock has dropped 32% over the past month as of close on March 17. The company has been forced to shut down its amusement parks as states are moving on broad shutdowns to prevent large public gatherings. It followed this up with a closing of its hotels and shops. Movie theatres have also been shut down across the country, putting added strain on an industry that was already facing the rise of streaming. There is also the suspension of seasons in major sports leagues, which will deal huge damage to revenues at ESPN.
Fortunately for Disney, its liquidity position remains very strong. Disney have over $12 billion in revolver capacity and a large cash balance. In the near term, investors should expect dismal numbers from Disney. It is currently trading near a 52-week low, and it is difficult to estimate a bottom. Shares last had a favourable price-to-earnings ratio of 14 and a price-to-book value of 1.4.
