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Disney Cutting Dividend Says It Means Business, Jim Cramer Says

Jim Cramer breaks down how to approach Disney stock after its latest earnings report came in less than magical.

Disney’s (DIS) - Get Report latest earnings report was less than magical to say the least.

The Walt Disney Company reported earnings of 60 cents per share, marking a 63% decline from the same period last year. Revenue came in at $18.01 billion. Analysts had expected earnings of 80 cents per share on revenue of $17.81 billion.

Despite news that Disney will reopen Disneyland Shanghai with special precautions and limited capacity on May 11, the majority of Disney’s parks, cruises and film openings have been closed or canceled since at least mid-March.

Theme parks segment saw a 10% drop in revenue to $5.5 billion and theme park operating income suffered a 58% loss, falling to $639 million.

Shanghai attendance will be limited to 30% of its normal capacity upon reopening and guests will be required to wear masks and will be subject to temperature checks. Commenting on normal park capacity of around 88,000 guests, newly minted CEO Bob Chapek told investors Tuesday, "We are going to open up far below that to have our training wheels on.”

Disney’s direct-to-consumer segment proved to be a bright spot in an otherwise dismal earnings report. The company reported that its streaming service, Disney+, now has 54.5 million subscribers. “The response to Disney+ in particular has exceeded even our highest expectations,” Chapek said.

In addition, Disney plans to scrap its semi-annual dividend in a move aimed to save $1.6 billion and did not provide guidance for the rest of 2020. "We continue to actively evaluate additional mitigation strategies to position our Company to emerge from this crisis with the financial flexibility necessary to get back on a growth path,” CFO Christine McCarthy said during the company’s earnings call.

Real Money’s Stephen ‘Sarge’ Guilfoyle noted Disney could “provide a blueprint for the reopening of travel and leisure, and how investors react.”

So how is Jim Cramer approaching the stock, one he holds for his ActionAlertsPLUS portfolio? Catch his latest take in the video above. 

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