Disney shares fall after most disappointing earnings report in 10 years drags price targets down, even by bullish analysts

Shares of Walt Disney Co. plunged to an 11-month low on Thursday, as several analysts slashed the price of even their most bullish price targets in response to the media and theme park giant’s disappointing earnings. and prospects for Disney + subscribers.

But Wall Street remained extremely optimistic about Disney’s outlook, underscoring the continued rebounds expected in the company’s other businesses and expectations of a possible recovery in the streaming business.

DIS stock,
-1.53%
fell 6.9% in afternoon trading, putting it on track for the lowest close since Dec. 10, 2020. The drop in the share price of $ 12.03 reduced around 79 points the DJIA of the Dow Jones Industrial Average,
+ 0.50%
price, while the Dow Jones lost 131 points, or 0.4%.

It would also be the biggest one-day percentage drop after earnings for the stock in 10 years, as it plunged 9.1% on August 10, 2011 after Disney released results for the third. quarter 2011.

Bernstein analyst Todd Juenger reiterated the market performance rating he had on the stock for at least three years, but lowered his price target to $ 164 from $ 167. He said his main takeaway from the earnings report was that the resumption of the slope of the Disney + subscriber curve comes later than investors expected, “provided that happens.”

He questioned Disney’s assumption that the re-acceleration will occur when the “full cadence” of new content begins arriving on the service at the end of 2022.

“Who is this consumer who was not interested in [Disney+] when he had the library and original Marvel content, Star Wars, but will become more interested when there is 2 times as much original content from the same brand? Juenger wrote in a note to customers. “We have yet to meet the kid who says no to a scoop of ice cream, but yes to two.”

FactSet, MarketWatch


Moffett Nathanson’s Michael Nathanson also questioned the assumption that growth in subscriber numbers will follow rising content spending, especially if new content is from the same brands.

“[W]We wonder if Disney + is too narrow a product and requires a much larger investment in non-Disney content to broaden the appeal of the product, ”Nathanson wrote.

He kept his rating neutral but lowered his target for the share price to $ 175 from $ 180.

Meanwhile, of the 31 analysts surveyed by FactSet, only eight, or 26%, had equivalent wait ratings on Disney. The other 23 analysts all had equivalent buy ratings.

FactSet


One of those bulls is Jessica Reif Ehrlich of BofA Securities. She lowered her price target to $ 191 from $ 223, saying the stock could be in the “penalty box” in the short term after the “tough quarter and outlook,” but reiterated her buy rating. Basically, the business of the company will still recover from the COVID-19 pandemic, but the pace of that recovery will be a little slower than initially expected.

“With the worst of the COVID impact seemingly over, Disney operations are expected to rebound in [the second half of fiscal 2022], driven by international tours, cruise ship ramp, [direct-to-consumer] increased content, pent-up demand and opportunities in sports betting, ”Ehrlich wrote.

Longtime bull Alexia Quadrani at JP Morgan lowered her price target to $ 220 from $ 230 while reiterating the overweight rating she has had on Disney for at least 2.5 years.

She said that while the title may remain under pressure in the short term after disappointing results and unfavorable prospects, the company remains its preferred media title in 2022.

“Despite this disappointment, we are encouraged by the additional clarity regarding the growth in subscriber numbers and the affirmation of the longer-term sub-goal,” Quadrani wrote. “The stock could stay in a range after a lower open for a while, as investors regain confidence in the story of longer-term subscriber growth after two recent quarters of weaker results.”

Potential positive catalysts she sees include a rebound in subscriber growth, starting in the current quarter, and better-than-expected results in the theme park industry.

Shares of Disney are down 10.4% year-to-date, while shares of rival streaming giant Netflix Inc. NFLX,
+ 3.81%
rose 22.7% and the Dow Jones rose 17.5%.


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