On Monday Disney stocks rose up to 15.9% and remained up 12% at the close of the market. This is an interesting turn of events given the entertainment empire’s substantial losses of late. So, why the sudden recovery?
Also on Monday, pharmaceutical giants Pfizer and BioNtech reported positive results from their Covid-19 vaccine trials. Of course, the regulatory approval process could take a while, and the vaccine may not be widely available until 2021, but the news has prompted investors to revisit the travel market.
Disney, like so many others, has suffered immense losses during th Covid-19 crisis. In the third quarter, park closures, capacity restrictions, and cruise cancellations led to the company’s loss of $3.5 billion in operating income. Revenue fell 85% in the Parks, Experiences, and Products segment. In late September, 28,000 Cast Members in this division were laid off. Despite the huge demand for Disney’s streaming entertainment service, Disney+ could not offset the 55% decrease in studio entertainment revenues as well.
But with the promise of an end to the Covid-19 crisis in America, it appears that perhaps a meaningful recovery is on the horizon, as investors return to travel stocks. I, for one, am certain that Americans are very eager to travel again, and it’s a safe bet that more will be doing so when they feel safe. Interestingly, just last week when Disney stock was down 17%, The Motley Fool suggested it was a good time to buy. If the market and investors continue to bid up DIsney shares based on the promise of a vaccine, I will be wishing I had listened. Disney will release its fourth quarter fiscal results on Thursday after the bell. We shall see what they say and what kind of recovery the year ahead will bring.