When someone tells you that they’re going to send people on tours of space in a spaceship, you tend to pay attention. This same assumption can be applied to how investors are treating Virgin Galactic (NYSE: SPCE), which has seen its stock soar close to 200% in 2020 alone.
Investments in risky stocks have been the norm as of late, with the likes of Virgin, Tesla (NASDAQ: TSLA), and Beyond Meat (NASDAQ: BYND) gaining popularity, while stocks such as Amazon (NASDAQ: AMZN) and Boeing (NYSE: BA) become viewed as ‘boomer’ stocks.
In all this noise, it’s easy to forget about some of the more established brands which are making big news, and despite Virgin’s $55 million quarterly loss, it was not even the top story of the day. That goes to Disney (NYSE: DIS).
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What is going on at Disney?
After a tough day for the ‘happiest stock on Earth’, which saw its share price fall nearly 4%, its long-time CEO, Bob Iger, and the mind behind the company’s most successful era announced his shock resignation. Parks boss Bob Chapek will be taking over as the biggest mouse in the house, while Iger will step back into a ‘creative executive’ role until his contract with Disney expires in December 2021.
Iger took over at Disney in 2005 when it was struggling financially and creatively. It was under Iger that Disney began its inexorable march towards world domination, as it took company after company under its wing and conscripted it into the global juggernaut offensive that is the Walt Disney Company. Acquisitions such as Marvel (2009) and Lucasfilm (2012) have given Disney an arsenal of content, on top of its almost 100 years of filmmaking, that allowed it to take on the biggest name in streaming, Netflix (NASDAQ: NFLX), with its new Disney+ original content streaming service.
Iger was the mastermind behind all of this, as well as Disney’s dominance in cinema in recent years, culminating in a record $12 billion box-office haul in 2019.
Can Iger be replaced?
That’s the $230 billion question because that is the worth of the company that new CEO Bob Chapek has just inherited. Chapek himself has spent years at the helm of Disney’s often overlooked yet undoubtedly lucrative Parks, Experiences and Products segment. This has been a cash-cow for Disney in recent years, making up roughly a quarter of the company’s annual revenue and bringing in more than $26 billion last year alone.
Disney however, is about to have a very tough time.
Threats to Disney
Disney has not been immune to the current market downturn caused by the rising threat of the coronavirus. Tech companies such as Apple (NASDAQ: AAPL) and travel firms such as Delta (NYSE: DAL) and Booking Holdings (NASDAQ: BKNG) are among the worst affected.
Disney has been forced to shut down its theme parks in Hong Kong and Shanghai due to the virus during its busiest time of the year in the region at an expected cost to revenue of $175 million. When questioned about this problem on Tuesday though, Chapek was optimistic:
“When you have a brand as strong as us with tremendous franchises and built-in consumer demand, we know that when we are able to re-open, we will come back better and stronger than ever.”
Disney will bounce back
Coronavirus aside, it has been a good year for Disney. 2019 saw its stock price rise 36%, its movie segment shatter all box office records, and the company accounts for more than 30% of total cinema tickets sold in the U.S. in 2019 alone.
With its cinema arm in good health, Disney+ continuing to scoop up subscribers — which numbered nearly 30 million in January — and its U.S. parks segment still on the rise, the current economic mood should not dampen spirits too much, and Iger is leaving the company in a much better place than when he found it.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Disney. Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.