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Some Positive News About Disney's Parks

This is a very good thing for a company whose balance sheet has been stretched.
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Two Trades Friday -- And We Have Our Eye on a New Name

Disney (DIS) shares are seeing a nice lift today on positive news about the reopening of its theme parks and entertainment complexes.

First, we want to touch on Shanghai Disney, the park that is expected to reopen next Monday, May 11th. In our earnings write up this week here, we said to view its reopening as a positive catalyst. Advanced tickets for the park went on sale at 8:00 a.m. local time Friday, and it was very successful. According to the Bloomberg article here, which cited the Shanghai Disney Resort website, tickets for the park sold out within minutes. Sure, government restrictions will limit capacity to about 30%, the park will not be as fun and profitable as it once was, and management will have to be at the top of their game to ensure proper safety precautions are in place. But the fast sellout is a sign that there is plenty of pent-up demand and that the consumer is willing to give it a shot.

Secondly, Disney said Thursday night that it will begin a phased reopen of Disney Springs on May 20th. Disney Springs may not be a theme park (it's an outdoor Shopping, Dining, and Entertainment complex in Orlando), but it is part of the overall Disney experience and represents an important precursor to the reopening of the Florida theme parks.

Outside of Parks, we are hearing more and more professional sports leagues discussing their comebacks. We think it is still premature to say sports will resume "business as usual" later this year, but the conversation is encouraging, to say the least.

Overall, it is great to see some positive news come back to Disney, an iconic company that has been greatly tested by the Covid-19 pandemic. If the parks can successfully reopen, albeit at less capacity, it should still be financially beneficial and the drag on Disney's bottom line will become less intense over the next couple of quarters. This is a very good thing for a company whose balance sheet has been stretched. However, we are not ready to upgrade our rating to ONE just yet because we prefer to have a little more visibility into the reopening, and the stock is already nicely up about 7% since the earnings call.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long DIS.