With 2020 coming to a close this week, home entertainment has been more pivotal than ever as the coronavirus continues to ravage the nation and globe, intensifying stay-at-home restrictions amid holiday celebrations. One of the companies that has continued to dominate the entertainment space is Disney, whose stock is up 2.72% Monday.
With hits like The Mandalorian and Wonder Woman 1984 garnering millions of watchers recently, Disney’s stock has gained 20.1% year-to-date compared with the Zacks Media Conglomerates industry’s growth of 17.7%.
The move has helped to buoy ETFs like the John Hancock Multifactor Media and Communications ETF (JHCS) and the Fidelity MSCI Communication Services Index ETF (FCOM).
In its latest move, the entertainment giant recently uncovered the first look of its next cruise, Disney Wish, which is scheduled to set sail in 2022. The upcoming ship is the first of the three fresh vessels to be added to the Disney Cruise Line through 2025.
Although the coronavirus has dramatically impacted leisure companies such as cruise lines and airlines, dragging down ETFs like the U.S. Global Jets ETF (JETS) at various points throughout the year, Disney believes travelers will be impressed with its new offering.
The main hall of the Disney Wish is adorned with a grand winding staircase and a statue of Cinderella, an iconic Disney princess. In addition, Disney hopes to improve the guest experience by adding an enchanted energy to the interiors with other ornate decorations.
As Parks Shut Down, Streaming Steps In
Disney’s performance has been especially impressive given how the global shutdown of theme parks to curb the spread of Covid-19 has hurt Disney’s Parks, Experiences & Products segment, which includes its theme parks, resorts, and the Disney Cruise Line.
In the fourth quarter of fiscal 2020, revenues from the Parks, Experiences and Products segment (17.5% of total revenues) plummeted 61.2% year over year to $2.58 billion.
Additionally, the majority of Disneyland Resorts remained closed in the October-end quarter while its re-opened parks and resorts operated at a lower capacity, damaging its performance. The entertainment behemoth projects that coronavirus-induced problems will to continue to plague the top line in 2021.
Fortunately, hugely successful hits like The Mandalorian in its online streaming service Disney+ have allowed the company to battle declines in revenues due to the shuttering of theme parks. Its Direct-to-Consumer segment, which includes Disney+, ESPN+, and Hulu, largely benefits from elevated demand for streaming services.
“It might have something to do with baby Yoda, but for me it’s engagement with the Star Wars universe without all the recent Star Wars baggage. And without yet another Star Wars plot featuring a mega-weapon which must be destroyed (which seems to be the only plot Disney can dream up for Star Wars feature movies over the last decade),” explained John Koetsier on Forbes.com.
Disney projects its streaming services to hit 300-350 million total subscriptions by fiscal 2024. The positive outlook is largely fueled by the expansion of fresh content across its portfolio, with Disney+ set to release more than 100 titles per year.
Financial experts are excited by the company’s recent moves, and some expect them to continue.
“Disney has made this unbelievable epic run to the upside obviously because of streaming,” said trader Pete Najarian, who spotted unusual options activity in Disney Monday. Najarian currently holds Disney calls, and plans to keep them for several days.
For investors looking to use ETFs to play the entertainment company, the iShares US Consumer Services ETF (IYC) is one fund to consider, with its 6% allocation to DIS.
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