Mickey Magic Is Losing Its Luster

July 20, 2020

States are trying to reopen cautiously and figure out how to resume school in the fall.

Florida continues to have mixed information with news reports that Florida health officials are inflating the numbers.

Despite the political theater and main-stream hysteria Disney World decided to re-open the park.

Universal Studios, owned by Comcast Corporation (NASDAQ: CMCSA), had already reopened with limited capacity back in June. But when Walt Disney Co (NYSE: DIS) posted its promotional video "Welcome Home" it received so much backlash it was removed from social media.

The park sees an annual attendance of over 58 million visitors and is the most visited vacation resort in the world. So, you can imagine what that did to revenues when activity shuttered to a halt mid-March.

Along with closing its five other properties worldwide, Disney suspended cruise lines, halted film and TV productions and closed retail stores. ESPN is still working hard to provide compelling content in the absence of live sports.

Disney’s Hong Kong and Tokyo properties reopened in mid-May, and now Orlando has been opened since the weekend.

It will be interesting to see whether opening the parks at a reduced capacity actually ends up costing more money than it’s worth. Cast members are all wearing masks and sanitizing surfaces ever so many hours. All those extra costs are going to add up.

With theme parks and production shut down, the company quickly made the switch to prioritize direct to consumer business. Disney+ has surpassed 50 million subscribers globally. However, this was the main driver behind an operating losses increase of $427 million for the quarter ending in March.

That same quarter EPS fell to $0.60 compared to $1.61 the previous year.

Again, that’s the quarter ending in March, which really isn’t seeing the full effect of US parks shut down. Disney’s next earnings release in August will be even worse.

But, investors don’t seem to care. Share prices are only slightly lower than this time last year.

Realistically when share prices slid in March, that’s where they should have stayed…at least until operations were back up and running.

Shares are trading at 35 times earnings right now. Historically Disney has stayed under a 25 P/E ratio which is way more reasonable. The craziest part is that analysts think that could be even higher next quarter.

On top of all that, the company has suspended its dividend to save money. It’s been paying a dividend since the early 90s. Dividend investors look for long track records since it usually indicates future payout stability. But now Disney doesn’t even have that going for it.

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It’s a poor mixture of dropping revenues and investors' optimism that past normalcy is right around the corner.

Disney is dead money in your portfolio and money is flowing into American 3.0 investment opportunities.

That's where we want to be and we'll continue to focus on in Emerging Profits Daily and with my newest and best recommendations found in Wealthy Tech Investor.

To your prosperity,

Joshua M. Belanger
Executive Publisher & Founder

Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%

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