Is Star Wars Over-Hyped? Disney Analyst Issues Surprising Warning

• Shares of Walt Disney Co (NYSE: DIS) have been rising steadily since September 25, when they fell to a low of $100; and are up 8 percent in the last three months.
• Barclays’ Kannan Venkateshwar maintained an Equal-Weight rating on the company, with a price target of $98.
• Investor expectations from the upcoming Star Wars movie appear too high, Venkateshwar stated.

Analyst Kannan Venkateshwar mentioned that investors who are focusing on the potential performance of Walt Disney’s upcoming Star Wars movie are likely to be disappointed if expectations are not met.

“To us, predicating the Wars: The Force Awakens, performance of a $200bn EV company on one movie which impacts segments accounting for less than a quarter of Disney's EBITDA and an even smaller portion of cash flow, appears to be more a function of hope than reality given Disney's multiples,” the analyst wrote.

Investor expectations of the movie earning $2-3 billion in global box offices appear to be too high. Venkateshwar added that comparing the movie’s box office collections with those of Avatar and Titanic is inappropriate, since those two movies were exceptions.

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While the international box office has contributed nearly 66 percent of the average collections of the biggest movies this year, certain markets like China are not very familiar with the Star Wars franchise, Venkateshwar pointed out.

“While Disney's promotional efforts should help address this, we believe to extrapolate familiarity to affinity and expect the movie to be one of the biggest of all time in China may be a stretch,” the Barclays report noted.