Could potential panmdemic create wise buys?

The frightening stories on TV about coronavirus create significant uncertainty in all financial markets because of the mammoth space China occupies in the global economy. Also, China’s behavior has shown how effort and resources that should have been spent combating spread of disease were instead channelled toward obfuscation and reputation management. Stories of doctors being silenced are just as upsetting as the virus’ spread.

The economic implication of China’s response has led to a dip in confidence that China will be able to manage the situation and keep up with its global supply and consumption obligations. One area where this could create a short term opportunity is Disney. Coronavirus is looking to contribute to a $280 million loss for Disney’s theme parks in China. Seems like bad news for the American entertainment colossus, but a look at the fundamentals reveals a lot of strength.

The Disney Plus streaming video service is proving to be a success in the early going, with over 26.5 million paid subscribers, which is ahead of the company’s projections. These numbers are fuelling buy ratings from a number of analysts. There has been some rocky going though, with Disney showing disappointing quarterly earnings in the second half of 2019.

Even with the reported revenue sag, 2019 was a tremendous year for Disney at the box office. Star War: Rise of Skywalker and Frozen 2 both went north of $1 billion worldwide. With more mass appeal releases scheduled for 2020, there is good reason to believe these successes will continue. 

Along with the Disney Plus subscriptions, there is also documented uptick in download and use of the accompanying app.  Reports show over 41 million downloads and around $97.2 million in consumer spending. App experience is rated highly by users who preferred it over products offered by Netflix, Amazon, Hulu and Apple.

With its $261 billion market cap, Disney will weather the coronavirus storm. The more uncertain question is whether China itself will. The uncertainty that accompanies that question may momentarily push down stock prices while hundreds of millions in revenue evaporate. But when the company is as strong as Disney, you know that is just a dip.