The uncertainty brought about by the COVID-19 pandemic led to significant changes in consumer spending habits. The personal savings rate jumped to a record level, as people put cash away for a rainy day. If you’ve got $2,000 that you don’t plan on spending for a long time, then it’s an especially good time to think about stocks you could buy and maybe never sell. Let’s look at what makes…
Walt Disney is bringing its parks back online
Disney announced plans to reopen Disney World on July 11 and Disneyland on July 17. Its park in Shanghai already opened in May with encouraging signs of customer ticket purchases. Still, the parks will need to be constrained to a limited percentage of capacity to allow for physical distancing.
Importantly, the segment that includes Disney parks generated 45% of total operating income for the company in 2019. The pent-up demand and the ability for the company to raise prices should allow the segment to eventually return to pre-pandemic profit levels.
Disney’s content library is best-in-class and durable. Movies that were released decades ago are still relevant today. For instance, Disney’s Beauty and the Beast was originally released in 1991 as an animated feature. In 2017, the live-action remake made over $1.2 billion at the box office. Moreover, Disney has 25 films that have generated over a billion dollars in box-office revenue, with seven of those released in 2019. Further, it has the Star Wars and Marvel franchises, which between them have eight movies that eclipsed $1 billion in box-office revenue in the last four years. These high-value assets give the company a sustainable competitive advantage.
Disney+ already has over 50 million subscribers and is not finished with its international expansion. The streaming service launched in Japan this month and is rolling out in more countries throughout the rest of the year. Although not yet profitable, the service is generating troves of data that the company can use to optimize its content creation schedule.
When investing in a company for the long term, I like to consider if the company’s products and services will be around for the next 10 or 20 years. In this case, it’s probable that parents will be taking their kids to Disney parks and introducing them to Disney movies for a long time.
Amazon.com is surging during the pandemic
Over the last five years, Amazon grew sales at a rapid pace, and it has the potential to continue that streak. Between 2014 and 2019, its revenue went from $89 billion to $280 billion. Amazon is benefiting from customer shopping moving from brick and mortar retail stores to online. The shift is likely to continue, and maybe at an accelerated pace, as the coronavirus pandemic makes people reduce trips to the store.
The pandemic created a surge in orders for Amazon. Increasing customer engagement will likely result in some of those customers sticking around for the long term, a portion of them even becoming Prime members. In 2019, 65% of shoppers on Amazon had Prime memberships.
The company has a loyal base of…
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