By
Tolu Ajiboye
February 9th, 2024
Disney stock is especially vulnerable in the short term, while the company has a strong position in the long run. At the moment of writing, DIS stock is 3.67% down, at $101.61 per share.
The entertainment industry is one of the worst-hit spheres in the coronavirus pandemic. Entertainment companies incurred huge losses, having to temporarily shut down theme parks and cinemas, indefinitely postpone movie production, lay down employees. The Walt Disney Company (NYSE: DIS) is no exception. As its activity is now under a big question, Disney shares are falling. Besides, analysts are downgrading their ratings on Disney stock because of the company’s “unrivaled earnings risk.”
MoffettNathanson’s Estimates
MoffettNathanson’s Senior Research Analyst Michael Nathanson has downgraded his rating on DIS stock from “buy” to “neutral”. In addition, he cut his price target from $120 to $112.
In the report released today, Nathanson explained:
“There are a number of risks that could lead this unprecedented event to have a longer impact, with earnings revisions massively skewed to the downside. Our Disney downgrade is also an admission that we believe the economic impact on the company will be longer than most anticipate, especially given the risks of a second wave of infections after reopening.”
Further, the analyst made a negative prediction on Disney earnings. Its stock is especially vulnerable in the short term, while the company has a strong position in the long run.
In conclusion, Nathanson said:
“While Disney has the advantaged assets to win in this new world, we fear that the uncertainty of the present situation creates significant and unrivaled earnings risk for the foreseeable future. The economic impact of social distancing is obviously most severe for the two divisions (Theme Parks and Studio Entertainment) that have driven free cash flow in the recent term.”
Disney Earnings Forecast
MoffettNathanson has also lowered the earnings expectations for Disney. Notably, this reduction refers not only to the 2020 fiscal year but also to the 2021 fiscal year, as the negative impact of the pandemic will probably cause trouble for a rather long time.
According to Nathanson, the 2020 revenue of Disney theme parks will be $17.7 billion. This is 33% down from the previous forecast of $26.2 billion. The unit’s earnings before interest and taxes (EBIT) will drop by 65%, from $6.8 billion to $2.4 billion. As for Disney’s film unit, the analyst predicts its earnings will decline by 20% this year, with the revenue dropping by 23%. Finally, for Disney media networks, Nathanson predicts a 4% earnings drop to $7.8 billion, with a 3% decline in revenue.
The analyst wrote:
“For more than a decade, we have been stalwart believers in the factors that make Disney different than the rest of the media pack. The company’s leadership, strategic positioning, asset mix, and brand equity have consistently delivered for their investors… While Disney has the advantaged assets to win in this new world, we fear that the uncertainty of the present situation creates significant and unrivaled earnings risk for the foreseeable future.”
Disney (DIS) Stock Performance
On May 1, Disney shares ended at $105.50. The opening price today has been $103.00. At the moment of writing, DIS stock is 3.67% down, at $101.61 per share.
Disney market cap is $183.514 billion, the annual stock change is negative, 27.06% down.