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2020-05-04

Disney, hit hard by coronavirus, faces questions from Wall Street about company impact

Image:-Disney

That girth, during the global coronavirus pandemic, has now made it the most vulnerable among media companies. Wall Street will be assessing the damage level on Tuesday and looking for signs of a bottom.

Disney's ESPN cable channel, with sports leagues dormant, has resorted to showing reruns of old games and fringe programming such as stone-skipping competition. Centers for profit like its theme parks and cruises are either closed or docked. Its powerful content engine has dramatically slowed down as productions are on hiatus, and film theaters remain dark.

"Disney has a bull's eye on her back like no other media company," Jessica Reif Ehrlich, analyst at Bank of America Merrill Lynch, said in an interview. "They're greatly affected."

On April 6, Ehrlich cut Disney's estimates of revenue for 2020 by 15 per cent to $70.9 billion.

Disney declined commenting.

Tuesday's fiscal second-quarter financial report of the company will offer the first assessment of the damage caused by coronavirus to the global business of Disney.

Overall, analysts expect Disney to report $17.8 billion in revenue from January through March, 19 per cent higher than 14.9 billion a year ago, and 89 per cent earnings per share, down 45 per cent from $1.61 a year ago.

The earnings report will also be the first outing for Bob Chapek, the former parks chief who moved into the job of chief executive in February just as the pandemic spread across the globe. Chapek assumed the new role as Bob Iger stepped down to become chief executive.

Executives will be confronted with analysts seeking answers on how they plan to navigate the unprecedented global crisis.

NEW REALITY

Disney has in many ways adapted to the new reality. It provided early access to "The Last Dance," an ESPN documentary series about great basketball Michael Jordan which became an instant hit, to home sheltered audiences. The draft coverage for the National Football League also drew record ratings for the broadcast network ESPN and Disney's ABC.

Among other shifts, Disney early moved Pixar's film "Onward" to video-on-demand, and put "Frozen 2" and "Star Wars: The Rise of Skywalker" on the Disney+ streaming platform.

Ehrlich and many other analysts are optimistic about a long-term future for the company. She is one of 13 analysts who rate a "buy" on Disney shares.

"They've got incredible brands and it's managed extremely well," Ehrlich said. When the health crisis subsides and the economy bounces back, "the demand for sports and experiences, theme parks, movies and television shows will be pent-up," she said.

Among other analysts, according to data from Refinitiv, five rate Disney a "strong buy" and 10 a "hold."

A bright spot is the streaming platform Disney+ which debuted in November. On April 8, Disney said the offer had attracted more than 50 million paid subscribers within five months. In 2020 the service will expand to include more countries.

But Disney is heavily spending on building up its digital future. Analysts expect to report a loss of $861 million on the streaming division, known as direct-to-consumer and international. The unit will turn a profit by fiscal 2024, Disney said.