Disney Generates Surprise Profit After One of its Worst Years

February 12, 2021
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In 2019, Disney (NYSE: DIS) was riding a wave of success with its Marvel and Star Wars franchises. The company generated one-third of all global box office revenue that year.

2020 then came with a completely different set of circumstances. The Coronavirus Pandemic decimated cinema attendance worldwide and Disney was forced to shut its parks in the United States and abroad. The company lost $4.72 billion in the period from April to June, while revenue dipped by 42%. Disney reported another disappointing quarter towards the end of the year, with earnings per share of -$0.20.

The company now seems to have turned a corner. With the release of several Coronavirus vaccines and the relaxing of economic restrictions in America and other nations, the company is returning to growth.

Surprise Profit in the Fiscal First Quarter

Disney reported on its fiscal first quarter yesterday. The company generated a surprise profit of $17 million, equivalent to $0.02 per share. It’s not quite where the company would be without the economic impact of the Coronavirus Pandemic, but it’s still much better than the losses sustained last year.

With adjustments, earnings were $0.32 per share, compared to $1.53 per share in the year-ago period.

Disney+ is helping to drive revenue. The streaming platform now has 95 million active subscribers, surpassing the expectations of the company. This time last year, it had 26.5 million subscribers.

Where Will the Stock Go Now?

Investors and analysts recognize the fundamental strength of Disney. It operates some of the world’s most profitable (pre-pandemic) theme parks, owns many of the most valuable media franchises, and has a robust studio and distribution network under it. With the addition of Disney+, the company now controls its own direct-to-consumer film and television distribution service.

The negative Coronavirus impact is temporary. Disney can sustain the conditions of today and continue to recover. Writing it off as an investment would be ill-informed.

The stock has blown past its $189.30 average target price and is edging closer to the high-end estimate of $211.00. These figures are likely to be revised considering Disney’s return to growth.

Any investor focused on the entertainment industry can consider Disney a viable stock pick in February. As the world’s largest mainstream media and entertainment company, it has the potential for long-term growth and stable returns.

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