Please ensure Javascript is enabled for purposes of website accessibility

Why Disney Stock Is Dropping Today

By Joe Tenebruso - Jun 11, 2020 at 1:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The novel coronavirus remains a fearsome threat.

What happened

Shares of Walt Disney (DIS 2.33%) fell on Thursday as states across the country struggle to contain the spread of COVID-19. As of 12:33 p.m. EDT, Disney's stock was down more than 5%.

So what

There are now more than 2 million confirmed cases of COVID-19 in the U.S. Worse still, 113,000 Americans have died from the disease. 

In recent days, more than a dozen states have reported a record number of new COVID-19 cases. Health officials -- many of whom have long warned of a second wave of infections -- are now also cautioning that the first wave is far from over. 

An amusement park ride with no people on it.

COVID-19 could cause Disney's parks to remain empty. Image source: Getty Images.

In addition to the terrible loss of life and widespread economic carnage that spiking coronavirus infections could bring about, the crisis is also likely to have a particularly negative impact on Disney's business. If people grow more fearful of getting sick -- or worse, of their children getting sick -- they may rightfully choose to avoid Disney's crowded parks and resorts after they reopen.

Now what

Until a vaccine or effective treatment for COVID-19 is developed, Disney's parks, resorts, and cruise lines will not be the profit drivers that they were before the pandemic. Fortunately for Disney's shareholders, Disney+ is benefiting from the stay-at-home trend. The new streaming service already has more than 54 million subscribers, and millions more will likely subscribe in the coming months and years. So, although major parts of Disney's empire will continue to suffer during the COVID-19 crisis, the entertainment colossus should be able to weather the storm.

Joe Tenebruso owns shares of Walt Disney. The Motley Fool owns shares of and recommends 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
$109.11 (2.33%) $2.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.