Analyst Says Disney Has “Unique Vulnerability” to Coronavirus

While many companies have been impacted by the coronavirus already and continue to face risk, one analyst believes Disney is the most vulnerable.

According to Lightshed Partners analyst Richard Greenfield, the coronavirus pandemic threatens to disrupt the entire Disney “flywheel.”

Greenfield initiated coverage on Disney this week with a neutral rating Wednesday, and warned that the pandemic threatens to disrupt the entire Disney “flywheel.” Disney has had to close its theme parks due to the virus as well as postpone some film premieres.

According to the analyst, Disney’s business relies on movie releases that drum up interest in everything from TV spinoffs to consumer products to theme parks. This could lead to “downstream” revenue sources if the film industry doesn’t return to normal.

In a note Greenfield wrote, “While it is entirely possible that movie theaters reopen in the fall of 2020, the question becomes what does that mean? If a 300-seat movie theater does every other row and every other seat for social distancing, its capacity falls to just 78 (down 74%).”

The analyst also questioned whether many consumers would be eager to go to a theater even if social-distancing measures are put in place.

Disney has delayed its “Mulan” release to July, but Greenfield expects that a premiere then would mean a global box office total of below $300 million, “maybe even sub-$100 million to $200 million compared to their hopes of well over $1 billion.”

“While we are very excited about the early results from Universal’s Trolls World Tour, which skipped theaters and went direct-to-consumer (should soon be the biggest digital revenue movie in history exceeding Disney’s Avengers), we are talking about a sequel to a $346 million box office film, not a $1 billion to $2 billion blockbuster,” Greenfield wrote.

Disney shares have fallen 29% so far this year.

Disclaimer: We have no position in Walt Disney Co. (NYSE: DIS) and have not been compensated for this article.