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Dow Jones Tumbles 1,200 Points on Virus Fears; Apple Stock Outperforms; Disney Stock Plunges

By Timothy Green – Jun 11, 2020 at 1:33PM

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Analysts are still optimistic about Apple, and Disney faces the prospect of a surge in coronavirus cases as it tries to reopen its parks.

The good times are over for the Dow Jones Industrial Average (^DJI -1.11%). The Dow was down 4.3% at 11:50 a.m. EDT Thursday as the possibility of a second wave of the novel coronavirus spooked investors.

Confirmed cases of the virus are surging in some places around the U.S. following the easing of lockdown measures and the reopening of the economy. In Texas, more than 2,500 cases were confirmed on June 10, setting a record for the state. Florida, California, and nearly a dozen other states are also seeing an increase in cases.

Apple (AAPL 0.23%) outperformed the Dow thanks to some analyst price-target bumps, but shares were still down amid the broad sell-off. Disney (DIS -1.39%) stock was hit much harder. The company is preparing to reopen its U.S. parks in a highly uncertain environment.

A man with head on table in front of a declining chart.

Image source: Getty Images.

Apple outperforms on analyst optimism

Apple couldn't fully escape the steep sell-off in the major stock indices on Thursday, but a trio of analyst price target bumps helped limit the damage. Apple stock was down just 1.4% by late morning, making it one of the best-performing Dow components.

Wells Fargo chimed in on Thursday morning, raising its price target on Apple stock from $315 to $385. The bank based its optimism on mobile phone registration data for April and May in China, which showed a recovery in smartphone demand. Apple's total revenue from China was down 7.5% in the quarter ended March 28.

Bank of America also got in on the action, reiterating a buy rating on Apple stock and raising its price target from $340 to $390. BofA expects a quick recovery in demand in emerging markets, strong App Store sales in China, and gross margin improvements due to a mix shift toward pricier iPhones. However, the bank sees U.S.-China trade tensions and a lengthening iPhone replacement cycle as two risks facing the tech giant.

Lastly, HSBC upgraded Apple stock from reduce to hold, raising its price target from $225 to $295. The upgrade was based on the expectation that Apple will have a successful launch of 5G iPhones later this year.

How well Apple's new iPhones sell this year will depend partly on the state of the U.S. economy. While the situation is improving following the easing of lockdown measures across the country, a potential second wave of the novel coronavirus could dampen that recovery. If consumers aren't keen on shelling out for an expensive new smartphone amid a recession, Apple stock may have a rough road ahead.

Disney slumps as second wave fears mount

Few companies are more exposed to risk in a second wave of the virus than Disney. The stock was down 5.8% by late Thursday morning as investors chewed on the idea that the pandemic is far from over.

Disney is planning to begin a phased reopening of its Disney World Resort in Florida on July 11. The company has also unveiled plans to begin reopening its Disneyland Resort in California on July 9. Under the plan, which still requires government approval, various portions of the resort will reopen on dates ranging from July 9 to July 23. Capacity will be significantly limited, and a new theme park reservation system will be in place.

The big question: How many guests, especially those who need to fly in from other parts of the country, will return to the company's properties amid a pandemic? This question is complicated by the potential for a second wave of the virus, which could make people less likely to make the trip. Disney may be facing a long period of depressed attendance, and it may take a successful vaccine for the company's parks business to fully recover.

Disney stock has surged from its March low on optimism surrounding the company's reopening of its properties. That optimism seems to be fading as cases of the virus surge in some parts of the country.

Timothy Green owns shares of Bank of America. The Motley Fool owns shares of and recommends Apple and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$150.77 (0.23%) $0.34
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$98.12 (-1.39%) $-1.38
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$29,260.81 (-1.11%) $-329.60

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