The winners and losers among 11 Disney businesses, as its credit rating takes a hit over park closures and production shutdowns (DIS)

• Disney's credit rating was downgraded by S&P Global Ratings on Thursday, because of uncertainty around when its theme parks, and TV and film productions, will be allowed to reopen.
• Previously in April, Wells Fargo analysts projected that Disney's parks will remain empty for the rest of the company's fiscal year, which ends in September, and be filled to half capacity to limit crowding next fiscal year.
• "Until the time at which there is significantly improved testing and/or a widely available vaccine it's tough for us to imagine long lines for 'Rise of the Resistance,' no matter how much folks might want to go to [Walt Disney World] deep down," the Wells Fargo note said.
• The Wells Fargo report also broke down the impact of lockdown measures on 11 of Disney's businesses, including Disney Plus, which it estimates will become more valuable.
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This post was originally published on April 9 and has been updated to reflect Disney's changed credit rating.
Disney's credit rating is taking a hit as its theme park, and TV and film productions, remain halted.
On Thursday, S&P Global Ratings downgraded Disney's credit rating to an A-, citing the massive disruptions to the entertainment company's theme park, TV, and film operations.
"Most importantly, theme parks and film and TV studios remain closed by government-mandated social distancing orders and it's unclear when they will be allowed to reopen," the firm said in the April 23 report.
Analysts at Wells Fargo previously forecasted that Disney's theme parks, which are closed globally, wouldn't reopen until next fiscal year, and could take two years for attendance to fully recover.
The Wells Fargo report from April 7 also broke down 11 of Disney's businesses are being impacted by lockdown measures around the world.
The firm, which said it had been bullish on Disney since the media company unveiled its streaming strategy in 2017, said in the April 7 report that it was tweaking its view in light of the severe global disruption to Disney's theme-park business, an impeding "ad recession," and a challenging theatrical environment.
Wells Fargo is now targeting an enterprise value of $244 billion for Disney over the next 12 months, 26% less than before the coronavirus outbreak.
Disney's current enterprise value is about $234 billion after the stock took a beating amid coronavirus concerns and as the company took on more debt.
The biggest cuts from Wells Fargo's valuation came from Disney's theme-park business, which was once a reliable profit driver.
Other businesses, like streaming services Hulu and Disney Plus, became more valuable in Wells Fargo's analysis. Disney announced on April 8 that Disney Plus had reached 50 million paid subscribers globally. The service is available in the US, Canada, eight Western European countries including the UK, and India, where it's bundled with another Disney streaming service, Hotstar, and has about 8 million subscribers.
"We've thought the value creation from Disney Plus (and later on Hulu) would be enough to more than offset a declining environment for media networks," the note said. "We still believe in that, but we didn't foresee this unique and severe downturn for parks."
The analysts expect "zero park attendance" and no revenue for the rest of Disney's fiscal year, which closes on September 30, since Disney's theme parks are now closed.
Even when the parks reopen, it'll take time for attendance to ramp up again. Wells Fargo projects Disney parks will be filled to half capacity during the company's next fiscal year to limit crowding. It could take two years for attendance to recover, the firm said.
"Until the time at which there is significantly improved testing and/or a widely available vaccine it's tough for us to imagine long lines for 'Rise of the Resistance,' no matter how much folks might want to go to [Walt Disney World] deep down," the note said. "We see the limiting factor as healthcare technology as assets like Walt Disney World will either need to operate with social distancing in-place — significantly limiting capacity — or a vaccine will need to be widely enough available that the population will again feel safe in such a gathering. Testing may also improve, allowing customers with immunity/antibodies to behave a bit more freely."
Disney executives seem to be realizing that as well. Bob Iger, Disney's executive chairman and former CEO, told Barron's that Disney was discussing whether it would need to implement temperature checks at its parks, similar to the way it checks visitors' bags.
"One of the things that we're discussing already is that in order to return to some semblance of normal, people will have to feel comfortable that they're safe," Iger said in the interview. "Some of that could come in the form ultimately of a vaccine, but in the absence of that it could come from basically, more scrutiny, more restrictions. Just as we now do bag checks for everybody that goes into our parks, it could be that at some point we add a component of that that takes people's temperatures, as a for-instance."
Here's the breakdown of Wells Fargo's valuation for each of Disney's businesses, based on company reports and Wells Fargo's estimates:

Company asset	Target Enterprise Value before April 7	Target EV after April 7
Studios (Marvel, Pixar, Lucasfilm, Disney, 20th Century Fox)	$94.8 billion	$73.8 billion
Parks	$66.7 billion	$22.9 billion
Disney Plus (excluding India AVOD)	$46.7 billion	$54 billion
Consumer products	$36.3 billion	$14.8 billion
Hulu	$22.2 billion	$27.1 billion
ESPN	$17.6 billion	$11 billion
Other cable networks (e.g. FX)	$14.9 billion	$14.2 billion
Broadcast networks and studios	$12.2 billion	$8 billion
International networks	$9.2 billion	$7.6 billion
BAMTech	$5.1 billion	$5.1 billion
ESPN Plus	$5 billion	$5 billion
TOTAL	$330.6 billion	$244 billion

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For more about how the coronavirus pandemic is affecting media, see our coverage on BI Prime:

• 40 advertising execs who manage $90 billion in spending describe how they're shifting their 2020 budgets in a new report. Here are 4 key takeaways for the TV industry: Connected-TV platforms like Roku and Hulu are expected to see the biggest gains in TV advertising, and Disney is the best-positioned cable-network group.
  
• The key factors analysts are watching at 5 major media companies including Disney and Fox to help determine whether their stock will keep falling or rebound: Combined, Disney, Fox, ViacomCBS, Discovery, and AMC Networks lost $92 billion in market value since the last market high on February 19, largely thanks to Disney.
• Disney has closed its US parks 'until further notice' and risks losing $1.5 billion in revenue per month they are shut, analysts say: Disney is extending "until further notice" its closures of its US theme parks, Disney World and Disneyland, because of the coronavirus pandemic, the company announced on March 27. 
• Analysts lay out the financial damage each of Disney's businesses could face, as it closes parks 'until further notice' and delays films: Disney is one of the media companies most exposed the impact of the coronavirus because of its large theme-park and theatrical businesses.
• Why analysts say Disney and Discovery are the media giants most threatened by the coronavirus, but Comcast could fare better: Companies that generate significant shares of their revenue from theme parks, films, and advertising are most sensitive to the pandemic and the economic downturn it could ignite.
• Why Netflix's business could take a hit from the coronavirus, despite reports that 'stay at home' stocks could benefit: Much of Netflix's revenue growth is international, including markets like Europe and Asia, which are especially vulnerable to the virus.
• Disney's surprise CEO change makes sense because of the coronavirus' growing impact on its business, according to a Wall Street analyst: The day-to-day pressures of the Disney CEO may mount if the coronavirus continues to spread outside of China, drawing former chief Bob Iger's focus at a crucial creative moment.

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