Disney Shares Drop 11% to New Multi-Year Low on Missing Revenue, Weak Profit Outlook – The Verge

Updated with closing stock price: Disney The stock closed at $86.75 a share, down more than 13% as investors punished the company for its disappointing quarterly income weak earnings reports and forecasts.

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%. The stock has fallen more than 43% in 2022 so far, compared with a decline of less than 10% for the Dow Jones Industrial Average.

previous: Disney stock has fallen more than 11% today on double its normal trading volume, as investors recalibrate their expectations in light of shaky quarterly earnings reports.

At $88.53, Disney shares are at their lowest point since 2014, with bears seizing on the company’s lower-than-expected profit forecast as well significant undershooting from Wall Street Expectations for the fiscal fourth quarter. Disney’s streaming business has proven a bright spot (Disney + added 12.1 million subscribers to hit 164.2 million globally) but profitability weighs in the minds of investors ‘even executives’ try to calm them down. Traditional businesses like linear TV are under significant pressure from cord cutting.

In a flurry of research notes, analysts debated the put and take from earnings reports and conference calls with executives. Some of them reduced their share price targets for the company, although they remained firm with their recommendations to investors and did not rule out a decline based on the latest numbers.

Michael Nathanson of MoffettNathanson called the company’s forecast for fiscal 2023 segment revenue growth of high numbers, far below the Wall Street consensus of 25% and his own view for 34% “the biggest controversy” in finance. “Rarely have we been so wrong in our forecasts of Disney’s profits,” the analyst wrote. “Given the company’s belief that the Parks trend appears to be resilient, it appears that the culprits for the massive revenue decline are higher than expected DTC losses and significant declines in linear networks.” Nathanson, who maintains a “market perform” (neutral) rating on Disney shares, lowered his 12-month price target by $30, to $100.

The winner for the cheekiest headline went to Michael Morris from the Guggenheim, who nodded to Obi-Wan Kenobi’s Jedi mind tricks in the title of his Disney record “This Is Not The Result You’re Looking For”. He dropped his 12-month price target to $115 from $145, but still has a “buy” on Disney shares.

Jessica Reif Ehrlich of BofA Securities conceded the quarter was “tough,” but she painted a brighter picture than many of her Street colleagues. She reiterated her “buy” rating on the stock, but cut her 12-month price target to $115 from $127.

“The quarter and outlook were disappointing, but not as bad as the headline numbers might suggest,” he wrote in a note to clients. “We believe theme park demand remains healthy and the operating income miss is largely due to one-time items vs. moderating demand. In the linear network, Disney faces many of the same obstacles faced by other industry participants, but we believe that its iconic brand and scaling/improving their DTC services positions them well to manage these headwinds and industry transitions relative to their peers.

Ben Swinburne of Morgan Stanley expressed even more optimism than Ehrlich, affirming his “overweight” (buy) rating on Disney shares and setting a price target of $125. He characterized the lighter-than-expected revenue and profit guidance for fiscal 2023 as “mainly a function of margin pressure on legacy TV networks, with F4Q Parks & Streaming results also contributing.” In a note to clients, Swinburne wrote, “We remain bullish on the growth outlook for the Parks segment, and expect it to represent the majority of Disney’s EPS over time, and believe the stock is undervaluing Parks assets at current levels.”

A notable bull is John Hodulik of UBS, who has a “buy” rating on the company’s stock. While 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 the future of streaming.”

Amid stock market drama Disney CEO Bob Chapek traveled to New York today. Exec, who is increasingly seen in recent months as the worst of the Covid has eased, made another public appearance at the Paley Center for Media’s International Council Summit in New York.

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