Did Disney just hedge its plans for Abu Dhabi?
Disney's stock prices surged today following its second quarter earnings report this morning.
The company's stock price jumped more than 7.5% in trading today, leading the Dow, after the company reported a 7% increase in revenue and 4% rise in operating income for the quarter. The stock price increase was the largest one-day jump for Disney since last May, when the company announced its deal for Disney Abu Dhabi.
Today was Josh D'Amaro's first earnings call since taking over as Disney's CEO in March. He did not face any analysts' questions about the Abu Dhabi project, but he did mention it in passing.
"We also have a few exciting expansions underway using what we're calling a 'capital light' model," he said. "So we've got a new cruise ship with the Oriental Land Co. in Japan, and a new theme park in Abu Dhabi with our partner Miral."
Disney's earnings report letter offered more insight.
"The strategic logic of our Abu Dhabi plans is unchanged," Disney's letter said. That statement has been interpreted, uh, generously in many news reports today.
Look, I hated diagramming sentences in seventh grade English class. But I remember enough of those grammar lessons to parse that the subject in that sentence is not "our Abu Dhabi plans."
It's "logic."
In other words, Disney said that its rationale for pursuing a new theme park in a new market remains unchanged. It did not say that its specific plans for Abu Dhabi remain as they were before the Iran's attacks on the United Arab Emirates in response to the United States' and Israel's attacks on Iran.
Granted, there might not be much to Disney's plans to change, at this point. The statement continues, "Major new theme parks are necessarily longterm in nature given the lead time of these projects, and this investment approach has consistently benefited our business."
In Disney's latest annual report, the company noted its Abu Dhabi plans with Miral, concluding that "the development of the resort is subject to finalizing agreements among the parties."
To date, I have seen no filing or statement from Disney that such finalizing agreements have been made.
I am a big fan of Miral's attractions and think that the marriage of Disney's creative teams and Miral's development leadership is a match made in heaven for theme park fans. I also have written before that Disney has no incentive to walk away from this deal, unless Miral is unable to make payments for the design and development of the park. Given that Miral is backed by the Abu Dhabi government, it is hard to imagine that Miral would fail to do make those payments, so long as the UAE remains solvent. And if that happens, a lot of the world is gonna have bigger problems than whether or not Disney builds another theme park.
Given the severity of what is happening in the Middle East, perhaps it is wise for Disney to lie low and not make its Yas Island project a metaphorical or literal target. So for now, theme park fans waiting for some tangible news about Disney Abu Dhabi will have to keep waiting.
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I get where you're coming from Robert, and being noncommittal on Abu Dhabi doesn't seem to be impacting Disney's performance or perception among analysts. I agree that the partnership that they've struck with Miral is highly advantageous because it provides very little risk and substantial reward. However, at some point the rubber needs to hit the road on this development. Disney can only kick this can down the road for so long, and while Miral holds most of the responsibility for moving this project forward, it still has Disney's name on it, so if it were to get cancelled or hit any major delays, Disney will take a big hit. They may not take a direct hit financially because they're spending very little on this project, but the perception of the project could drag the company down and impact confidence that Disney can deliver a new theme park project while competitors (particularly Universal) have been able to expand their park portfolio in the past decade.