There’s a lot I don’t understand about science and virology. But I understand marketing and the power of a great brand. So even in the midst of a global selloff in equities, I remained bullish on Disney (NYSE:DIS). And since my last article, DIS stock is up 20%.
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However, skeptics will note that DIS stock was down nearly 45% for the year at the end of March. So it’s fair to ask — is this is just a case of Disney investors grabbing some low-hanging fruit? I don’t think so.
What is helping Disney right now is first and foremost the hope that the worst is behind the company. But Disney is also taking concrete action to help renew investor hopes. I agree with InvestorPlace Markets Analyst Luke Lango, the reopening of all the company’s businesses may take some time, but right now the world needs a little magic. Disney is ready to deliver.
And that means that DIS stock is a good choice for investors looking for growth in 2020.
The Best and Worst of Times for DIS Stock
This year has been the best of times, and the worst of times, for Disney. Heading into 2020, Disney was firing on all cylinders. And DIS stock was sitting just below the record high it set in November 2019.
Of course, then the novel coronavirus began to sweep the nation. Unfortunately, Disney was not immune to the stock selloff. But Disney’s problem was far more acute. It has done a masterful job of building its brand from theme parks to hotels to cruise lines and retail stores. Then late last year, Disney launched Disney+ and obtained 50 million subscribers in just five months.
All of these businesses — with the exception of Disney+ — were affected by the lockdown. Theme parks were closed, along with hotels and retail store. Cruise ships were given the no-sail edict. The movie studios could not make new content. Launch dates for movies that were completed were postponed.
The Return of Live Sports Patches an Important Hole
The one weakness in the Disney fortress was ESPN. The company had purchased ABC, and by extension ESPN, nearly 25 years ago. And for most of that time, ESPN has been a wonderful and profitable partner. But in an age of cord cutting, ESPN has been losing its magic.
The luster of ESPN dimmed even further with the absence of live sports. As I wrote back in early May, Disney has a contract with the NBA that is north of $2 billion. The company has been getting no return on that investment. But that may be about to change.
It will be a logistical challenge for sure, but the NBA is contemplating continuing its season at Disney. The proposed plan would have the league using Disney’s ESPN Wide World of Sports Complex as a single campus.
Yes this would bring the company revenue. But it would also bring much needed exposure.
Disney Is Turning Setbacks Into Opportunities
Universal Studios, which is owned by Comcast (NASDAQ:CMCSA), recently announced it will open its theme parks on June 5. Disney is taking a slower approach. The company has opened its shopping and dining complexes, but it will be content to learn from Universal.
That looks to be a smart strategy. Being the first through the door may give Universal a small first-mover bump. But this is a situation where it’s far more important to open right than to open first.
I’m not saying that Universal will have problems. I hope it doesn’t. But Disney will undoubtedly benefit from watching and waiting.
Death, Taxes and a DIS Stock Rally
OK maybe I overstate the bullish case a little, but when it seemed like the world was falling apart, my social media feeds expressed a common sentiment: “When can I rebook my Disney vacation?” The question wasn’t if it would be safe to go back, but rather when Disney would be allowed to reopen.
Are there risks? Absolutely there are. But Disney is an amazingly sticky brand. It has bounced back from 9/11, from the financial crisis and I believe it will come back from this as well. And in the process it will probably establish some best practices for what a safe reopening looks like.
That’s the power of a brand. It’s the power of being a destination. And it’s the kind of magnetism that comes from being a global icon. Disney has powerful catalysts that are only starting to be activated. If you’ve been staying on the sidelines it’s not too late to jump back in on DIS stock.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
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