While concerns over public gatherings led the Disney parks to shut down recently, many fans are hoping to see them reopen as soon as it is safe to do so.
Magic Kingdom
But perhaps, no one’s more eager for the parks to resume their operations than the Walt Disney Company itself because they’re continuing to lose millions of dollars every day they remain empty.Â
And now, as first reported by Nasdaq, S&P Global has just downgraded Disney’s rating to an A-minus, down from its previous A. The company is also being kept on CreditWatch Negative, meaning it could be cut it again in the near term.
Empty Toy Story Mania Queue
What does that mean? Think of the S&P (Standard and Poor’s) ratings as, in a nutshell, the overall health of a company. The rating takes into consideration debts owed, how quickly and consistently debts are repaid, and company earnings. Ratings go from AAA down to D with a slew of levels in between. The S&P Credit Rating is used to help investors determine where to focus their efforts (or not) in the Stock Market.
Disneyland Main Entrance
This downgrade isn’t too surprising, considering Disney has acquired more debt over this time and dramatically lowered their earnings. S&P noted, “Disney’s theme parks won’t likely return to normal capacity utilization at the same rate as the overall economy even after stay-at-home restrictions are eased and the theme parks are allowed to reopen. Continued government-imposed social distancing, and, longer-term, consumer concerns about attending public events will likely retard theme park attendance.”
Hollywood Studios
Bank of America took Disney out of its top recommendation list for the U.S. today (although they still hold a Buy rating for the stock along with about two-thirds of Wall Street analysts. And despite having its rating cut, Disney shares went up 0.5%. We’ll continue to follow this story as it develops.
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“the overall health of a company” isn’t precisely right; the credit rating is just that – a rating of the company’s creditworthiness, just like your own personal credit score. Just because you have a less-than-stellar credit score doesn’t mean you’re “unhealthy;” it may mean that you’re intelligently deploying debt, but that you’re reaching the limit of how much you can take on. That’s all this means: Disney’s taken on a lot of financing to get through this, it will take some time to pay it back, and their revenue is likely to remain low for a while. Smart debt, particularly for a corporation, isn’t “unhealthy” any more than having a reasonable mortgage is unhealthy. It’s perhaps important not to OVERDRAMATIZE it, although I do realize you guys LOVE YOUR ALL CAPS!!! 🙂
Nope! Buying more!
Well aren’t you (DFB) breath of sunshine ! How about writing some positives for a change, without the teasers.
I’ll tell you though. Disney will bounce back. And bounce back HARD! Right now is the time to buy some Disney stock for cheap.