Although Walt Disney has been immensely challenged during the pandemic -- as are other traditional media companies -- investors looked well beyond this current period. And that confidence drove Disney stock to new heights in recent months.
Disney stock has shot up 53% over the last six months -- 225% higher since March 18, at the beginning of the pandemic. It closed on Friday at $178.90.
Now one veteran stock market media analyst -- Richard Greenfield of LightShed Partners, who has been down on Disney for some time -- has reversed his position, changing his “sell” recommendation in May to a “neutral.”
“Our call has been dead wrong,” he writes on Friday in a note. “Disney management surprised us by recognizing the urgency of leaning much more heavily into streaming at the expense of near-term earnings — something for which we have advocated for years. And investors have rewarded Disney’s wise decision.”
Greenfield notes that instead of focusing on the post-COVID world, “especially as it became clear vaccines were on the way,” investors look well beyond this current period.
Since mid-March, Disney has been enormously challenged by dramatically sinking revenues and profitability, due to theme-park closures, cruise-line shutdowns and global theatrical film business disruptions.
In the third quarter, Disney posted a net loss of $580 million -- its first loss in decades -- versus $1.25 billion net profit in the same period in 2019. Revenue was down a massive 23% to $14.71 billion.
Greenfield says it isn’t just about dramatically changing company efforts -- virtually for all Disney's businesses -- it is focusing almost entirely around a direct-to-consumer streaming emphasis.
“We were simply blown away by the depth of content being created for Disney+ (and the dollars behind it). [Disney's] increasing content spend on Disney+ to over $8 billion by 2024, compared to a target of $4 billion set just a year ago, is a dramatic acceleration.”