Disney Downgraded To Sell As Its Subscription Base Continues To Erode

The valuations of companies currently do not “appropriately reflect that the environment for stocks and companies is riskier now than was the case several months ago,” Pivotal Research Group’s Brian Wieser said in a report. He downgraded the rating on Walt Disney Co (NYSE: DIS) from Hold to Sell, while reducing the price target from $102 to $86.

Wieser cited “soft TV audience trends, ongoing erosion of ESPN’s subscriber base and mixed reports on Shanghai Disneyland from Asian press” as reasons for concern. He added that there was lack of clarity related to Disney’s CEO succession, although this could be resolved in the near term.

“On the positive side, the studio continues to perform spectacularly well, with the latest installment of the Star Wars franchise helping to sustain that division,” Wieser noted.

Q4 And 2017

Advertising had been strong through the end of Q3 2016. “At an operating level, 4Q16 and 2017 have mixed characteristics,” the analyst stated.

Political advertising had not been as favorable as expected, while underlying local TV advertising continued to be lackluster.

Large marketers are feeling the pressure to lower costs. Although large advertisers have mainly maintained their TV budget shares as a percentage of total advertising, with time, “digital-centric alternatives,” such as YouTube, may be better positioned to get a larger share of the advertiser wallet, Wieser commented.

At last check, shares of Disney were down by 1.13 percent at $108.20.