The company’s stock dropped almost 15%, making it the worst performer in the Dow.
Wall Street is hopeful that Disney (DIS) is set for a turnaround year. Bank of America has selected it as one of its top picks for 2022, betting that a receding pandemic will finally lift the parts of its business that have struggled.
Can Disney pull it off? The answer could say a lot about where stocks are headed next.
Rewind: In 2020, even as Disney was forced to shutter its theme parks and resorts for months and delay the release of blockbusters like “Mulan,” the stock was carried by enthusiasm about Disney+, which was rapidly adding subscribers.
But the sheen started to come off after the first quarter of 2021.
Growth for Disney+ slowed as competition in the streaming space heated up, and the rest of the company wasn’t bouncing back as quickly as many analysts had hoped.
In its most recent quarter, Disney reported revenue of $18.5 billion, compared to $19.1 billion for the same quarter in 2019.
There’s hope that 2022 could be better.
Disney “remains well positioned for the recovery driven by a continued increase in capacity at theme parks and an improving content slate,” Bank of America’s Jessica Reif Ehrlich and Brent Navon said in a recent note to clients. They think Disney will also add more range to Disney+ after the success of its “Get Back” Beatles documentary.
The twist, of course, is the rapid spread of infections due to the arrival of the highly contagious Omicron variant. That could lift Disney+ subscriptions as people cancel other plans, but once again put a damper on tourism. Last week, the US Centers for Disease Control and Prevention said that even vaccinated people should no longer take a cruise vacation.
Travel remained robust over the holiday period, based on the number of people moving through airports. But people could choose to stay home this winter if cases continue to spike. That would set companies like Disney back even further.
The big picture: Many on Wall Street are brushing aside Omicron. They think that 2022 will be a big year for stocks that were damaged by the pandemic and are now undervalued.
“Investors believe that Omicron, which is spreading like wildfire, may flame out sooner rather than later and provide widespread herd immunity,” Ed Yardeni, president of Yardeni Research, said Monday.
If that’s true, stocks like Disney could be back on track this year. Maybe.