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Coronavirus Outbreak: Boon or Bane for Disney Stock?

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Walt Disney (NYSE:DIS) stock is gaining momentum. Disney+, the company’s streaming service, surpassed 50 million paid subscribers globally on April 8. Notably, Disney+, which launched in November 2019, has reached this milestone in less than five months due to the coronavirus. COVID-19 forced people to stay at home and spend time streaming movies and TV shows online.

According to a CNBC report, former Disney CEO Bob Iger said that “about 20% of those subscribers came through a distribution partnership with Verizon. Disney+ is offered for free to some Verizon customers for a year.” Disney has expanded its streaming service in several markets including the UK, Ireland, Germany, Spain, France, Italy, Spain, India, Austria, and Switzerland in the past 15 days. In fact, the timing was perfect for the launch of Disney+ in India on April 3. The country was under 21-day lockdown to reduce the coronavirus risk.

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On December 28, 2019, the video streaming service had 26.5 million subscribers. In comparison, Netflix (NASDAQ:NFLX), the leader in online streaming services, has over 167 million worldwide customers. Amazon’s (NASDAQ:AMZN) Prime members have also grown to 150 million. All the Prime members get Amazon Prime Video as part of their membership.

Disney faces losses amid coronavirus crisis

While the coronavirus pandemic acted as a boon for Disney+ service, it has dented Disney’s other businesses. The company’s largest business segment, Parks, Experiences, and Products, has been hammered due to theme park closures and canceled cruises. Disneyland in California and Disney World in Florida are closed amid the coronavirus outbreak. The company also shut down its theme parks in Hong Kong, Shanghai, and Tokyo. Disney Cruises aren’t operating amid the COVID-19 crisis. The company expects to lose around $280 million in revenues due to park closures in Shanghai and Hong Kong, according to a MarketWatch report.

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The company had to stop movie productions and delay the release of big-budget movies. Currently, movie theaters are closed across the country. Disney-owned ESPN has been impacted by canceled sports events due to the deadly coronavirus havoc. On April 2, the entertainment company announced that its employees would be furloughed as of April 19. To add to the woes, on February 25, Iger decided to step down as Disney’s CEO. He led the company for 15 years. Cautious investors became jittery about the company’s upcoming quarterly results, which will likely be released on May 12.

Notably, Disney stock has declined more than the broader markets. On a year-to-date basis, Disney stock has declined by around 28% as of April 9. Meanwhile, the S&P 500 has declined by around 13.6% during the same period. Disney stock is trading at a 31.9% discount from its 52-week high levels, which it attained on November 26, 2019. At Thursday’s closing price of $104.50, Disney’s market value was $188.7 billion.

Can the streaming service revive Disney stock?

I think that Disney’s video streaming service could drive the stock higher and boost its earnings. Disney plans to bolster its Disney+ content portfolio to gain subscribers during the lockdown. I think that Disney’s solid and original content should help it survive this crisis and gain a competitive edge over streaming rivals. The company has preponed many movie releases on Disney+ to increase subscriptions. For example, Disney launched Frozen 2 on Disney+ in the US on Mar 15—three months ahead of schedule. The company also released Disney and Pixar’s Onward movie on Disney+ on April 3.

Besides, the company should gain after its operations resumed in China. Disney’s executives have also taken pay cuts to help the company recover quickly from the recent plunge.

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