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Disney’s Stock Sinks, Owing to Covid Closures’ Detrimental Effect on Parks in Asia

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Disney’s stock takes a dive as the result of park closings in Asia, owing to the loss of Covid. On Wednesday, Disney reported stronger-than-expected subscription growth, but it acknowledged that Covid’s influence on its Asian theme parks is still being felt.

The stock market was not kind to Disney on Thursday. The company’s shares fell more than 4% before the bell, following a 52-week low of $104.79 earlier this week and putting them below their 50-day moving average for only the second time since July 2017 when they hit an all-time closing low under 100 dollars per share.

Disney’s subscription service, Disney Plus has been a huge success. The company reported that total subscribers rose to 137.7 million during its fiscal second-quarter which is higher than the 135 Minaanalyst forecasted according to StreetAccount.

The company is reporting that the rate of change may not be as large in terms of subscribers, but they still expect it to grow stronger over time. Additionally, Disney+’s average revenue per user (ARPU) was up 5% this past quarter due largely to an increased ARPUSubscriber base which will allow them more opportunities for monetization through advertising channels

While there were some volatility issues with their international markets following President Trump’s travel ban, the Mouse House quickly reasserted itself by delivering strong performances across all regions including North America where overall attendance increased significantly.

“We are in a league of our own,” said CEO Bob Chapek in the company’s second-quarter earnings release. “Our strong results include a fantastic performance at home and continued growth for streaming services with 7.9 million Disney+ subscribers added this past month alone! We’re thrilled that total subscriptions across all DTC offerings now exceed 205 million.”

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Disney’s earnings per share are presently $1.08 adjusted. Their revenue was reported at $19.25 billion, which included a $1 billion decrease as a result of the early termination of certain licensing agreements. Disney+ total subscription is reported to be at 137.7 million compared to the expected 135 million, according to StreetAccount.

Investor enthusiasm for Disney’s subscription numbers rose after Netflix reported a quarterly loss of 200,000 subscribers.

The company forecasted another 2 million global paid user losses in the second quarter. Investors have been fleeing Disney stocks since January when the company’s value declined 30%. It is now down more than 40% compared with last year and investors are wondering if they can sustain streaming growth while also worrying about potential recession-induced harm to other businesses. However, there has been some relief as Covid restrictions begin lifting which should enable their margins to increase again in coming quarters.

The theme park chain’s parks, experiences, and goods business saw revenues rise by more than 120 percent to $6.7 billion in the third quarter from a year ago, as increased ticket prices were added to higher attendance as well as hotel reservations and cruise ship sailings, which have aided fuel this growth.

Despite the fact that domestic parks are beginning to see the return of international visitors, according to Disney, these numbers aren’t approaching those seen prior to the pandemic. This group of guests once made up 18% to 20% of attendees.

Furthermore, during the previous quarter, not all of its foreign parks were open full-time. While Paris Disneyland is celebrating its 30th anniversary, Shanghai Disneyland and Hong Kong Disneyland each experienced brief closures caused by local Covid spikes.

The Hong Kong Park reopened on April 21, while the Shanghai location has remained closed. McCarthy stated that owing to these closures in Asia, overall parks, experiences, and consumer products segment operating income for the current quarter may be reduced by $350 million.

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