Walt Disney‘s business was hit hard by the COVID-19 pandemic. Its theme parks and cruise line were forced to shut down, and watching movies in theaters just isn’t happening right now. Despite this, there’s reason to believe that Disney could emerge from the pandemic a significantly stronger business than before. In this Fool Live video clip, recorded on Jan. 25, Fool.com contributors Jason Hall and Matt Frankel, CFP, discuss why Disney’s business could be better than ever in a post-pandemic world.
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Jason Hall: All right, guys. I am going to just shoot right into Disney here and see if we can make some hay. Disney is interesting, right? This is a stock that’s pretty close to its all-time high, and yet I still think to a certain extent it’s misunderstood because there’s parts of the business that are struggling. You think about ESPN, you think about cable’s gradual decline, we know that it’s struggled with its cruise business, its theme parks, all those kind of things have struggled, we know it’s kind of hard to release billion-dollar blockbusters when all the movie theaters are closed, so we know there’s all of those things that are affecting its business. But the bottom line is, I think Disney for me, it’s like it’s a own-it-for-a-century. This is a company that you leave to your heirs because they own the content and they own the most timeless content. People are going to be paying to watch The Avengers, people are going to be paying to watch Star Wars, they’re going to be paying to watch all of the Disney-branded content a century from now, whatever medium it’s being produced on. People are going to be going in person to its theme parks. The company has this amazing, amazing pricing power, and I think it’s easier to sleep on how much pricing power that it has. Right now they are testing that pricing power with Disney+. Obviously, they’ve said streaming is the future, they’re focusing on developing streaming and they’re making that the medium that they want to use, shifting away from cable as much as they can, and they are testing things on Disney+, charging premium prices for one-time events. There’s a lot of things that they’re really working on to figure out what’s going to work best for the future. There’s no getting around, bottom line is that Disney is going to be a massive way that people consume video entertainment and experience live events in the future, I have no doubt.
Matt Frankel: I’ve called Disney the best combination of a stay-at-home stock in a reopening stock all in one.
Hall: No doubt about it.
Frankel: I think that they could eventually be one of the biggest beneficiaries of the pandemic business-wise. Disney+ I think met its five-year goals within nine months.
Hall: Yeah. It has absolutely crushed it. They’ve quadrupled all those goals. Their long-term goals are just so much higher now.
Frankel: Obviously, they didn’t know about the pandemic when they launched it back in October 2019.
Hall: A year ago, yeah.
Frankel: But you couldn’t have timed it better. Their adoption accelerated, so they’re going to come out of this pandemic with this new multi-billion-dollar revenue stream they didn’t have before, and demand for their legacy products if you can even call them that, are going to be just as strong as ever.
