Disney Analyst Says The Mouse Faces Park, Production Problems: 'A Ferrari Without Gas'

The unknown length and impact of the COVID-19 pandemic pose two problems for Walt Disney Co DIS, according to Wells Fargo.

The Disney Analyst: Steven Cahall maintains an Equal Weight rating on Disney's stock with a price target lifted from $107 to $118.

The Disney Thesis: Disney's amusement and entertainment parks are slowly coming back online, although the financial progress "could be choppy," Cahall said in a Thursday note. (See his track record here.)

One of the more concerning COVID-19 hotspots is in Florida, and Disney is scheduled to reopen the Orlando Disneyland on July 17, the analyst said. 

Disney could see lower revenue, as park-goers are likely to spend fewer nights in hotels at softer rates, he said.

Investors can forget about a resumption of cruises anytime soon, Cahall said. 

The Walt Disney World park is the primary driver of the segment's operating income, and the analyst said Wells Fargo doesn't even see a path for 2022-2023 operating income to get back to 2018-2019 levels.

Elsewhere in Disney's business, a four-month shutdown of filming and production translates to an estimated $4 to $5 billion of content that has been halted or slowed, he said.

The absence of content is akin to "a Ferrari without gas," Cahall said. 

The Disney+ streaming platform has shown impressive growth and is on track to hit its original 2024 guidance much earlier, the analyst said.

Yet incremental subscriber additions will be difficult, as the next phase of growth must come from regions where it already operates, as opposed to new markets, he said. 

DIS Price Action: Shares of Walt Disney were trading higher by 0.55% Friday morning at $119.07.

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