Cineplex (TSX: CGX) & Disney: Future of 2 Entertainment Stocks

Summary

• Movie theatres and production houses have incurred massive losses amid the pandemic.?
• Walt Disney stocks plummeted in March as its theme parks and other outdoor experience were forced to shut down.?
• Cineplex (TSX:CGX) stocks suffered as its movie chains remained shut for nearly six months in Canada and continues to stay closed in many other countries.
• The future of?entertainment stocks and?cinema theatres remain?clouded amid the social distancing norms and?changed audience?behavior.?

Stocks of media and entertainment companies like Walt Disney (NYSE: DIS or DIS: US) and Cineplex?(TSX:?CGX)?saw a sharp dip in value?this year after?lockdown restrictions forced?cinema theatres?and?productions firms?to shut down?in March. Disney?shut down?its theme parks and resorts?amid the pandemic, although it managed to score some gains?with the help of its new online streaming service — Disney+.?Cineplex, on the other hand, suffered more than just one blow.?One on hand,?its?movie theatre chains incurred massive losses?due to the lockdown. On the other hand,?a?$2.1?billion takeover bid?by?UK theatrical giant Cineworld?collapsed?in June.?

Share price of Walt Disney and Cineplex have seen a recent climb as both the media companies?tweaked?their business?models amid the pandemic. While Disney decided?to release its latest big-budget movie?Mulan?on its streaming platform, for a premium?fee of?C$?34.99, Cineplex started reopening its movie theatre doors to public?in?August-end.??

The Walt Disney Company?(DIS:US)?

Current Stock Price: C$ 131.25?

Walt Disney?was forced to shut down its?theme parks, resorts and other outdoor experience?hubs?such as cruise ships??due to the?coronavirus?pandemic. This?struck a massive?blow to its business, which?reflected in its third fiscal quarter report. Revenues from its?international parks and experiences business?plummeted by 85 per cent?in Q3 2020 ending on June 27.?Disney estimated that?the operating income generated from?this segment of its business?had suffered an impact of nearly US$ 3.5 billion in?Q3. Walt Disney Studio Entertainment also saw?its revenues drop by 55 per cent in this quarter, triggered by?decrease in theatrical distributions.?However, as the demand?for?online content?climbed?amid the pandemic,?Walt Disney’s?streaming platform Disney+ saw a boost in?numbers.?The company’s direct-to-consumer?(D2C)?services exceeded 100 million paid subscriptions in the third quarter, registering a two per cent increase in revenue in?the D2C?segment.?

This C$ 237-billion market cap company saw its?share?value?fall?as low as C$ 85.76 in March when the market crashed? following?the COVID-19 outbreak. In the last six months, the stock price rose?by 23 per cent.?Disney currently?distributes?a semi-annual dividend of C$ 0.88. The current dividend yields?stands at?1.34 per cent. Its price-to-book ratio (P/B) is 2.76 and price-to-cash flow ratio (P/CF) is 31.10.?

With theaters being shut in most countries, Disney had decided to release?Mulan?on its streaming platform in places where the service is supported. For China, however, the movie was screened in theatres.??

The company’s scrips dipped in value?in the second?week of September?after the live-action movie?Mulan?released in China on September 11 and was met with disappointment.?The US$ 200 million-budget movie has managed to collect around US$ 23.2 million over the weekend in China, from where?Mulan’s folklore belongs.?

Cineplex?Inc?(TSX:CGX)?

Current Stock Price: C$ 8.16?

Cineplex made headlines on Monday?after a report by?S&P Dow Jones Indices?revealed that?the movie theatre chain is going off?the S&P/TSX Composite Index?on September 21.?This news comes after Cineplex,?Canada’s largest media and entertainment company,?began a phased reopening of its movie theatres?in the last week of August.

?Cineplex?shares?took a big hit?when?movie theatres were forced to shut down in March amid the lockdown. Its?stock?price nosedived from C$ 31 on March 11 to C$ 8.84 on March 19, and it hasn’t quite recovered since. In the last six months, Cineplex scrips have plunged by nearly 72 per cent.?The company recorded?a 95?per cent drop its revenue in?the second quarter of 2020, down from C$ 438 million in Q2 2019 to C$ 22 million in Q2 2020. Its theatre attendance, which was a massive 17 million in Q2 2019, was a paltry 6,000 people in 2020’s second quarter.?

What?added further?damage?to Cineplex’s stock performance was?the failure of?the?C$ 2.15 billion takeover deal. UK-based?cinema chain giant?Cineworld Group Plc?was due?to?acquire Cineplex earlier this year but pulled the plug on the deal?in June?after?accusing?the latter?of breaching?contract?terms.? ?

In the last one month, Cineplex stocks gained 3 per cent in value. This could be a result of its movie theatres?finally?opening up?in Canada?after a nearly?six-month shutdown.?Considering that mass public gathering remains prohibited in most places, Cineplex opening its doors for a theatre experience could turn investors in its direction.?One of its first releases, Christopher Nolan’s?Tenet saw a limited attendance due to the continuing COVID-related restrictions. It ?managed to collect?US$?20?million?in?North American box office over?Labour?Day weekend.? ?

The future of cinema theatres remains clouded?amid the social distancing norms and?changed?audience?behavior.?COVID’s?seismic?shockwaves?on?the entertainment genre?will continue to shake up the industry, as reflected by big budget flicks?postponing their theatrical release.?The rise of online streaming channels like Netflix and?Disney+ has accelerated in these pandemic times.??