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Disney Shanghai Is Now Open: Why It Matters For Investors

Walt Disney Co (NYSE: DIS) over the weekend reopened its Shanghai theme park and this serves as a "great blueprint" for what will happen in the United States, JPMorgan med

Benzinga · 05/11/2020 18:11

Walt Disney Co (NYSE: DIS) over the weekend reopened its Shanghai theme park and this serves as a "great blueprint" for what will happen in the United States, JPMorgan media analyst Alexia Quadrani said on CNBC.

What Happened

"Normally, the park has a capacity of 80,000 people and 12,000 [employees]," according to CNN. For the time being, the park will only operate at 30% capacity. "Visitors to Shanghai Disneyland are now required to wear masks, have their temperatures taken and socially distance"

Based on Disney's timeline for reopening its Shanghai park, the company could aim for a July 1 reopening of some of its domestic parks, Quadrani said. Management confirmed Disney Springs will open in late May, but its property in California could stay closed longer.

Regardless of the opening date, Disney will "do the right thing" by going above and beyond government mandates and restrictions, Quadrani said. After that, the company will slowly build up slowly assuming early signs of success.

Why It's Important For Disney's Stock

Assuming Disney's parks are operating at one-third of their usual capacity, Quadrani said it "doesn't matter" from a profit standpoint. Disney's management made the case its reopening is more designed to cover the costs associated with the estimated $800 million per month loss.

"It's not about going back to normal right away, I think it's about baby steps and setting a path to normal," Quadrani said. "And that's what gets the stock going."

Disney's stock traded around $108 per share at time of publication.

Related Link: Disney's Business Hit Hard By The Coronavirus: Is Now A Buying Opportunity For The Stock?

What's Next: Mask Rules Need To Be Enforced

Disney's Shanghai park released a video detailing all of its health and safety upgrades and the attention to detail was "pretty impressive," Lee Cockerell, former executive VP of operations at Disney World, said on CNBC.

One problem with looking at China as a roadmap for the U.S. could be overlooking one major factor: masks are mandatory for entrance. If a similar policy is enacted in the U.S., "a lot" of Americans "won't listen."

"I think the enforcement piece will be the name of the game, Disney will need to figure out how to be nice and be firm," he said. "Because if you don't enforce this thing, then there are going to be a lot of other guests who will be skeptical of whether they should come or not."