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  1. Home
  2. / Investing
  3. / Stocks

Disneyland Demonstrates Theme Park Post-Virus Life in Shanghai

With the first of Disney's 6 theme parks back open in Shanghai, will business get back to normal in the world that Walt built?
By ALEX FREW MCMILLAN
May 11, 2020 | 07:51 AM EDT
Stocks quotes in this article: DIS, SNE

Mickey Mouse is back, and his mother tongue is Mandarin ...

Shanghai Disneyland reopened on Monday, the first of six theme parks around the world from Walt Disney (DIS) to get back in business. Life may have begun in Hollywood, but it has resumed in China's biggest city, a megalopolis of around 27 million souls.

Tickets quickly sold out when they went on sale at 399 yuan ($56) on Friday, with entrance timeslots stamped on the tickets. The park, which normally can accommodate 80,000 visitors per day, is operating at less than one-third capacity, with a maximum 24,000 guests. Face masks are de rigueur, and not just the headgear for Donald Duck and Minnie. Indoor attractions remain closed, though restaurants are open, and character selfies are banned.

Disney shares are up 8.0% since May 5, when the company announced the Shanghai park would reopen. That's part of a 27.3% rally since their low on March 23, having shed 39.3% in little more than a month.

Mind-boggling market movements, really, for a company with massive fixed-asset theme parks that would normally spin off easily predictable revenue, and an entertainment giant with a reliable back catalog of money-spinning movies and shows.

Disney lost about $1 billion in fiscal Q2 revenue as a result of the closure of its parks. Operating income shrank by $1.4 billion, or 37%, to $2.4 billion, with its cruise business also curtailed and costs for movie production to shut down. The bright spot was a strong showing for its new Disney+ streaming service, which surged past 50 million subscribers in April.

Both Shanghai and Hong Kong Disneyland closed on Jan. 25. That's normally one of the busiest times for the Chinese parks since it was the first day of the 2020 Lunar New Year, China's biggest holiday. The Shanghai park, which opened in 2016, is its newest, around four times the size of that in Hong Kong.

It's a clear sign of the importance of Hong Kong as a domestic economy that the park in Hong Kong remains closed. We have had no local transmission of the coronavirus for 21 consecutive days. So Hong Kong Disneyland could very safely resume business, too.

But that would not be politically or economically wise. The park depends on mainland tourists to supplement Hong Kong's 7.4 million population. And any visitor from across the border in China must spend 14 days in isolation on arrival in Hong Kong.

The two-week quarantine has put paid to any tourism. For the three-day weekend that began May 1, a total of 361 mainland tourists came to Hong Kong. In 2019, even with nine months of anti-China protests, there were 120,000 mainland arrivals, every day.

The shops outside the Shanghai park reopened even earlier than the park itself. Disneytown and the Shanghai Disneyland Hotel both opened their doors back on March 9 -- a few days before the parks in Anaheim, Orlando and Paris closed.

Disney is beginning life under a new leader in the toughest circumstances imaginable. CEO Bob Chapek, the former president of Disney Parks, took over on Feb. 25 from Bob Iger.

Elsewhere in Asian entertainment, we will be watching for full-year earnings on Wednesday from Sony (SNE) . There's speculation it may unveil details of the PlayStation 5.

In February, it raised profit and sales forecasts for the 2019 fiscal year, which in Japan ended on March 31, with strong sales in its image-sensor business, too. But as the coronavirus intensified, it warned that it may not hit those targets. We will see mid-week.

Tencent Holdings (TCEHY), the dominant videogame maker in China, will report Q1 earnings on Wednesday. Gametime has skyrocketed during China's lockdown, although Tencent has its fingers in so many pies that they're sure to have been burnt on other digits.

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TAGS: Fundamental Analysis | Investing | Markets | Stocks | Trading | World | Resorts and Hotels | U.S. Equity | Coronavirus

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