UPDATE with closing price: Disney stock closed at $86.75 per share, down more than 13% as investors punished the company for its disappointing quarterly earnings report and weak earnings forecast.
The one-day drop was the biggest for Disney shares since the start of Covid in the US in March 2020, when it also fell 13%. Stocks have fallen more than 43% in 2022 to date, compared to a drop of less than 10% for the Dow Jones Industrial Average.
PREVIOUS: Disney stock fell more than 11% today on double its normal trading volume as investors recalibrate their expectations in light of a flimsy quarterly earnings report.
At $88.53, Disney shares were at their lowest level since 2014, as bears seize on the company’s much weaker-than-expected earnings forecast as well as a significant understatement of Wall Street expectations. for the fourth fiscal quarter. Disney’s streaming business has been a bright spot (Disney+ added 12.1 million subscribers to reach 164.2 million worldwide) but profitability is weighing on investors’ minds despite industry efforts. leaders to reassure them. Traditional businesses such as linear television are under significant pressure due to cord cutting.
In a flurry of research notes, analysts debated call and put options from the earnings report and executive conference call. Several of them cut their stock price targets for the company, although they largely stuck to their recommendations to investors and did not issue downgrades based on the latest numbers.
MoffettNathanson’s Michael Nathanson called the company’s fiscal 2023 segment earnings growth forecast in the mid-single digits, well below the Wall Street consensus of 25% and his own outlook of 34% “the greatest controversy” in finance. “Rarely have we been so wrong in our earnings forecast for Disney,” the analyst wrote. “Given the company’s confidence that Parks’ trends appear resilient, it appears the culprit for the massive earnings downgrade is much higher than expected DTC losses and significant declines on linear networks.” Nathanson, who maintains a “market performance” (neutral) rating on Disney shares, lowered his 12-month price target by $30, to $100.
The cheekiest winner of the title goes to Guggenheim’s Michael Morris, who nodded to Obi-Wan Kenobi’s Jedi turn of mind by captioning his Disney note “It’s not the results you’re looking for.” He lowered his 12-month price target to $115 from $145, but still has a “buy” on Disney shares.
BofA Securities’ Jessica Reif Ehrlich acknowledged the quarter was “difficult”, but she painted a brighter picture than many of her Street colleagues. It reiterated its “buy” rating on the stock, but cut its 12-month price target to $115 from $127.
“The quarter and outlook were disappointing, but not as bad as the numbers might suggest,” she wrote in a note to clients. “We believe underlying theme park demand remains healthy and the loss in operating income was largely due to one-time items versus subdued demand. In linear networks, Disney is experiencing many of the same headwinds that other players in the industry face, but we believe their iconic brands and scaling/growing DTC service positions them well to better handle these headwinds. opposites and industry transitions relative to their peers.
Morgan Stanley’s Ben Swinburne expressed even more optimism than Ehrlich, affirming his “overweight” (buy) rating on Disney shares and setting a price target of $125. He characterized the softer-than-expected revenue and earnings outlook for fiscal 2023 as “primarily a function of margin pressure at traditional TV networks, with lower F4Q Parks & Streaming results also contributing.” . In a note to clients, Swinburne wrote: “We remain optimistic about the growth outlook for the Parks segment, continue to expect it to represent the majority of Disney’s EPS over time and believe the stock is undervalued. value Parks’ assets at the current level.
Another notable bull was UBS’s John Hodulik, who carries a “buy” rating on the company’s stock. Although he lowered his price target to $122 from $135, he concluded, “Although the macro environment presents challenges, we still see Disney as best positioned to transition into a streaming future. .”
Amid the stock market drama, Disney CEO Bob Chapek visited New York today. The executive, who has been increasingly visible in recent months as the worst of Covid subsided, made another public appearance at the Paley Center for Media’s International Council Summit in New York.
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