The Walt Disney Company (NYSE: DIS) experienced the best and worst of times in 2020.
On the positive side, Disney+ subscriber numbers exploded in 2020. Statista estimates Disney+ had 26.5 million subscribers in the first quarter of 2020 and 73.7 million subscribers in the 4th Quarter of 2020.
In detail, Disney+ had 50 million subscribers worldwide in April 2020, Statista estimates Those numbers grew to 54.5 million in May 2020, 57.5 million in April 2020, 60.5 million August 2020, and 73.7 million subscribers in fourth quarter 2020.
Thus the worldwide Disney+ subscriber base grew by 10.5 million in four months and 40 million in two quarters. To explain, Statista estimates Disney+ had 33.5 million subscribers in second quarter 2020.
Disney+ Grows like a Weed
In addition, The Verge claims Disney+ added 86 million subscribers between November 2019 and December 2020.
The Verge predicts Disney+ will explode in 2021 because enormous amounts of new programming could come to the streamer. For instance, big live-action adaptations of legendary Disney cartoons are coming to plus. Those adaptations will be Pinocchio and Cruella; based on the 101 Dalmatians villain.
New Star Wars, Marvel, and Pixar series could also come to Disney+ in 2021. Notably, WandaVision the first Marvel Studios show for Disney+ will premier on 15 January 2020. However, I think WandaVision could be too weird to find an audience.
To explain, WandaVision is a superhero satire shot as a traditional sitcom. To confuse viewers, WandaVision is also a parody of 1950s and 1960s sitcoms featuring two veteran Avengers the Vision and the Scarlet Witch.
Could Coronavirus Derail Disney+?
2020 was the worst of times for Disney (DIS) because of coronavirus. For instance, Disney faces a shortage of original programming for Disney+ because coroanvirus shut down production.
The new Marvel, Star Wars, and other shows Disney will need to keep subscribers could not be available until 2022 or later. Hence, we could see Disney’s subscriptions fall as viewers get sick of watching The Mandalorian repeatedly.
So far Disney has filled the Disney+ gaps with last-minute programs including a tape of a Hamilton state performance and Beyonce videos. However, I do not think such temporary fixes will placate fans permanently. Eventually, Disney is going to have to deliver those Marvel and Star Wars shows or lose subscribers.
Beyond production, CNBC estimates Disney lost $3.5 billion in the 3rd Quarter of 2020 because its theme parks closed, CNBC reports. In particular, Disney’s theme park revenues fell by 85%.
In total, Disney’s year-to-year revenues fell by 23% between 3rd Quarter 2019 and 3rd Quarter 2020, Variety reports. Consequently, Disney laid off 28,000 workers and canceled its quarterly cash dividend.
Is Disney Making Money?
Disney (NYSE: DIS) is losing money. For instance, Disney reported a -$4.996 billion quarterly operating loss on 30 June 2020.
The quarterly operating loss fell to -$862 million on 30 September 2020. In contrast, Disney began 2020 with a $2.692 billion quarterly operating income on 31 December 2019.
Similarly, Disney’s quarterly gross profit fell from $7.842 billion on 31 December 2019 to $3.692 billion on 30 September 2020. The bottom line: Disney loses money, but its losses are shrinking.
Conversely, Disney still generates some cash. For instance, Disney reported a quarterly operating cash flow of $1.667 billion on 30 September 2020. In 2020, the quarterly operating cash flow rose from $1.63 billion on 31 December 2019.
Disney Borrows Enormous Amounts of Money
However, Disney reported a quarterly negative ending cash flow of -$5.2 billion on 30 September 2020. The ending cash flow was so low because Disney had to borrow enormous amounts of money to survive 2020.
To explain, Disney reported a quarterly financing cash flow of $1.117 billion on 31 December 2019. The quarterly financing low rose to $5.499 billion on 31 March 2020 and $8.303 billion on 30 June 2020.
On 30 September 2020, Disney reported a quarterly financing cash flow of -$6.439 billion. That means Disney paid $6.439 billion in debt in that quarter.
Notably, Disney reported Total Long-Term Debts of $52.917 billion on 30 September 2020. In 2020, the Total Long-Term debt grew from $38.057 billion on 31 January 2020.
Thus, Disney is a company that had to borrow enormous amounts of money to survive. Instead of trying to shed questionable assets such as theme parks, Disney borrowed to survive.
What Value Does Disney Have?
However, Disney (DIS) has enormous value despite the debt. For instance, Disney had $17.914 billion in cash and short-term investments on 30 September 2020.
In 2020, Disney’s cash and short-term investments grew from $6.833 billion on 31 December 2019. Similarly, in 2020, Disney’s total assets grew from $200.948 billion on 31 December 2019 to $201.549 billion on 30 September 2020.
Unfortunately, I think Disney’s revenue shrinkage threatens its value. Notably, Disney’s quarterly revenues fell from $20.858 billion on 31 December 2019 to $14.742 billion on 30 September 2020.
Similarly, Stockrow estimates Disney’s revenue growth fell by -41.87% in the quarter ending on 30 June 2020. The revenue growth rate fell from 20.69% in the quarter ending on 31 March 2020. Plus, Disney had a quarterly revenue growth rate of -22.90% in the quarter ending on 30 September 2020.
Investors need to Avoid Disney
I think investors need to avoid the Walt Disney Co. (DIS) because of the revenue and growth collapse.
I believe investors must avoid Disney because its businesses is vulnerable to sudden events and Mr. Market overprices the stock. Mr. Market grossly overvalued Disney shares at $178.58 on 7 January 2021.
Moreover, Disney shares rose from $145.66 on 6 January 2020 to $178.58 on 7 January 2021. Thus, Disney shares rose in a year when the company suffered enormous losses and only survived by borrowing enormous amounts of money.
I think the financial numbers show Disney could collapse or face bankruptcy if the coronavirus pandemic does not end and make the company’s tourism business viable again. If the COVID-19 pandemic continues, Disney will face enormous losses and tough decisions such as abandoning theaters and closing theme parks.
Will Disney Collapse?
I think Disney+’s success shows Disney’s entertainment business can survive and grow. Unfortunately, there is no evidence Disney’s other businesses such as tourism can survive. Thus, Disney will have to change.
I advise investors to avoid Disney until the management gets tough and starts pulling the plug on questionable businesses such as theme parks. I predict Disney’s share price could collapse if the company cannot pay its debts.
Watch Disney (DIS) closely because this company could collapse.
Originally published at https://marketmadhouse.com on January 7, 2021.
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