The Walt Disney Company (NYSE:DIS) was having a great year up until the House of Mouse posted fiscal third quarter earnings on August 4, sending shares down 9% the following day and almost 19% since.
While Disney beat earnings estimates, the company missed the mark on revenue. The company attributes the miss to currency-exchange headwinds, which have impacted the cable TV and international theme park businesses.
With that said, Todd Juenger of Bernstein believes that the TV industry is beginning a “prolonged structural decline.” Consequently, the analyst downgraded his rating on Disney from Outperform to Market Perform on August 20. The analyst believes that consumers are moving from advertisement-supported platforms to innovative companies, like Netflix. The analyst’s concerns do not only apply to Disney, but the entire media sector.
On average, Todd Juenger has a 71% success rate recommending stocks and a +7.0% average return per recommendation when measured over a one-year horizon and no benchmark. He has rated Disney three times, earning a 75% success rate recommending the company and a +25.2% average return per recommendation.
Similarly on August 21, Cowen & Co analyst Doug Creutz maintained a Market Perform rating on Disney but lowered his price target from $98 to $89, commenting, “The company’s share price leaves little room for error and the lower growth rate in cable will likely put pressure on the Studio segment.”
Overall, Doug Creutz has a 50% success rate recommending stocks and a +16.1% average return per recommendation when measured over a one-year horizon and no benchmark. He has rated Disney twice with only Hold ratings, thus not earning a success rate nor an average return on the stock.
On the other hand, FBR analyst Barton Crockett still has faith in the House of Mouse, as the analyst reiterated an Outperform rating on the stock with a $124 price target on August 21. The analyst believes there are a handful of drivers that will help improve the company’s performance in the near term, including the start of football season, which will draw viewers to Disney-owned ESPN and serve as a catalyst for ad sales in the September quarter. Additionally, new merchandise from the next installment of the Star Wars franchise will drive near-term revenue. The new merchandise from Star Wars is set to hit stores on September 4. Crocket does “not think that level of retail support for a movie has ever happened before, setting this up to be the most merchandizable movie series ever.” With that said, Crockett believes the Star Wars franchise can profit up to $1 billion per movie and that Disney can capitalize on future spin-offs and sequels.
On average, Barton Crockett has a 57% success rate recommending stocks and a +10.4% average return per recommendation when measured over a one-year horizon and no benchmark. The analyst has rated Disney 11 times, earning a 73% success rate recommending the stock and a +18.4% average return per recommendation.
Out of 19 analysts polled by TipRanks within the last three months, nine analysts are bullish on Disney and ten are neutral. The average 12-month price target for Disney is $118.21, marking a 19.6% potential upside from where the stock last closed. On average, the all-analyst consensus for Disney is Hold.