Disney Set To Take A Massive Financial Hit Due To Coronavirus

Black Widow

The Walt Disney Company is set to take a massive financial hit as a result of the Coronavirus pandemic. Multiple aspects of the company’s enterprises have been drastically affected over the last few weeks. At the theater, we’ve seen their major tentpole releases either underperform or face having their release dates postponed. On top of that, this week’s announcement that AMC is shutting down all of their 630 domestic locations for at least six weeks will not help matters and in addition, Disney’s theme parks and cruise line have also closed.

However, the company has the financial resources to weather this storm. Deadline are reporting that Moody’s SVP and lead entertainment analyst Neil Bagley says that Disney has a large enough war chest in store and its financial rating will not change:

“No change in ratings or outlook (at this time). Liquidity reins supreme.”

He explained that the Mouse House has $12.25 billion worth of revolver capacity (short-term credit which a firm can access when it needs quick funding to pay for operating expenses or one-time transactions), as well as a sizeable cash balance. Bagley’s prediction is that Disney will engage in a cost-controlling exercise and seek to pay “significantly lower taxes” in the fiscal year of 2020. But the waters for the mega-corporation aren’t entirely calm, as Bagley went on to say that:

“There is potential for a significant economic hit to Disney if the closures last beyond June, but we expect the park closures and cruise ship suspensions to be a temporary disruption, hurting margins and adding to the $175 million operating income hit to the segment for the parks closed in Shanghai and Hong Kong earlier this year.”

One ray of sunshine for the company will be that Disney+ subscriptions should rise as bored viewers search for something to occupy their time with during the pandemic. However, there’ll likely be some regret that there’s no show as high profile as The Mandalorian launching this spring, and that the Coronavirus will mean that their much-hyped MCU Disney+ series are likely to face significant delays.