Disney’s reopening is on track, but what about inventory?

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Disney (NYSE: DIS) the stock has doubled from its pandemic low in March 2020. But with the stock price, it’s “what have you been doing for me lately?” Investors were disappointed by a “shortfall” in Disney + subscriber numbers for the most recent quarter, and the stock edged down after earnings. So Motley fool live episode recorded May 26Motley Fool contributors Toby Bordelon and Brian Withers discuss their recent quarter’s results and whether the stock has already “built in” the reopening push.

https://www.youtube.com/watch?v=ABan-XrPIo0

Toby Bordelon: Let’s move on to the next stock here, and let’s talk about Disney, what’s not to love? We have the theme parks reopening. What is happening. We have theme parks in California that are open now. They opened at the end of April. They are running at full speed. June 1, one of those. I can’t remember the exact date, but next week or the week after they will be at full capacity. It’s fantastic.

If you remember the pre-pandemic if you followed Disney, their biggest revenue segment was theme parks, which also includes cruise lines. But for these parks to regain their full capacity is a very good thing. People are coming back to the movies. I saw a recent poll from a movie chain or from Fandango, I believe. The percentages are really high in terms of people who go to the movies who want to go back, who are going to see several films in the summer or plan to do so. This is a really good sign. Marvel’s Phase Four is about to kick off in theaters. We have some new shows on Disney + Loki start, from June.

But let’s talk about one thing. Let’s underline one thing here. The recent earnings report is a bit of a disappointment for some investors because of these Disney + numbers. What were those numbers? They came in at 104 million subscribers and were expecting 109 million, so they were complaining about a difference of about five percent. When if you look at what has happened over the past year and a half, Disney + has gone from 0 million to 104 million in about 17 months. It’s amazing and I don’t mean, I think if you’re quibbling over five million you’re missing the point here. They will surpass Netflix during the quarter in terms of additional subscribers. ESPN + seems to be growing, which is weird when you think about it as it’s probably the one with the least amount of original content. They are doing well, the average revenue per user increases to this level in the ESPN + turn, the Disney + churn rate is not a problem. They seem to be doing well there. I think this business is doing well. I think no one should be worried about this, and the future looks good for them.

Brian Withers: It’s an exciting update. Toby, I love to see the parks reopen. But the market has already valued much of this reopening in the stock. I looked at stock prices from March 2020, in mid-March, when the coronavirus really came in and started shutting things down. Disney [stock] has since doubled. Do you think Disney stock prices could go down within a year?

Toby Bordelon: It is certainly possible. Like you said, there are a lot of awards right now. But I think we might be surprised when we get to the end of this year about the theme park and movie theater bounce wave. I’m not sure even with the pricing of this reopening business so to speak, we were really capturing the fullness of what Disney can do.

Look at these theme parks. We have the Star Wars hotel opening its doors, which is a multi-day experience that you stay in this hotel and you don’t leave. The new Avengers campus at Disneyland, I think it will also open in early June. There’s a lot going on both to bring people back and potentially attract a new segment of people who maybe weren’t big fans of Disneyland, Disney World parks before with The Avengers and Star Wars stuff. It’s an entertainment juggernaut and that’s not going to change anytime soon. Maybe you see a slight drop in the share price, but that’s not really something I would worry about.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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