Disney shares have biggest decline in 3 years

[crazy4wdw]

Disney shares fall on analyst downgrade

By Allen Wan Bloomberg News | Posted July 14, 2006

Walt Disney Co. shares had their biggest decline in three years after the company was downgraded by CIBC World Markets Inc., which cited slower growth in fiscal 2007 because of lower theme-park attendance and fewer television shows in syndication.

Shares of Disney fell $1.21, or 4.1 percent, to close at $28.70 on the New York Stock Exchange, the biggest percentage decline since June 2003.

Disney's rating was cut to "sector underperformer" from "sector performer" by CIBC analyst Jason Helfstein, who said he expects the company to report strong earnings growth in the second half of fiscal 2006.

Disney is in the fourth quarter of its 2006 fiscal year. It is set to release its third-quarter results Aug. 8.

Helfstein said 2007 will be more difficult for the Burbank, Calif.-based company as the purchase of the Pixar computer-animation studio dilutes profit, resulting in "single-digit" earnings per-share growth. Disney may only reach "double-digit" earnings growth through cost cuts, he said.

The Los Angeles Times reported Thursday that Disney is planning a major retrenchment of its movie-studio unit that would include hundreds of job cuts and a reduction in the number of films it makes.

Disney is expected to earn $1.65 a share in 2007, the average estimate of 24 analysts surveyed by Thomson Financial.

Helfstein kept his share-price estimate of $32 a share. Disney stock has risen this year, buoyed by the success of movies such as Pirates of the Caribbean: Dead Man's Chest, which broke box-office records during its debut last weekend.

Analysts are divided on Disney, with an equal number of "buys" and "hold" on the stock, according to Bloomberg data. There were two sell ratings on Disney.

Credit Suisse Group analyst William Drewry on Wednesday maintained his "outperform" rating for Disney, writing in a note that he expects the company to lead gains for large media and entertainment stocks.

 

[dbm20th]

I am not sure this analysis will prove to be correct. Theme Park attendance may not be lower at all, and the year for films is only half over. Hopefully this will make the stock more affordable and a good chance to buy low.

 

[Sonno]

Time to buy?
But who want's to buy blue chips anyway?

 

[dbm20th]

Time to buy?
But who want's to buy blue chips anyway?

That all depends on the effect this has on the price.

 

[slug]

Time to buy?
But who want's to buy blue chips anyway?

I look at Disney and I see a stock whose price is the same as it was 10 years ago and who pays a crappy dividend and I can see no reason at all to buy it.

And it is up in 2006, but that's b/c it's been underperforming for so long.

If it were to drop to the low 20's maybe but right now it's still a high price for Disney considering their track record.

 

[kydisneyfans]

The entire market is in shambles right now with political issues and oil through the roof. Many, many stocks are at long time lows-I have lost over 5% of my portfolio in 3 days, and the cost to fuel my vehicle has climbed 10%. Stocks, like Disney, that depend on discretionary income from consumers will continue to be hit until oil is back under control.

 

[raidermatt]

The market isn't exactly in shambles right now, but certainly it has been very volatile of late. If the Israeli/Hezbollah conflict continues to escalate, it might very well end up in shambles, but not yet.

With regard to Disney specifically, its true that world events can have a significant impact on their business. But there are other concerns that aren't related, hence the "sector underperform" rating issued by this particular analyst. He feels that Disney will not match the performance of other companies in the same sector.

From a practical pov, Disney can't do anything about world events or the economy. All they can do is position themselves to do as best they can both now and in the future within that environment. Analyst opinions are split on that, as noted in the article.

 

[PKS44]

Disney stock rose when the baby boomers were kids and bought into Disney products then soared again when those boomers bought into Disney-style for their children--as their kids became teenages/slackers- Disney became sort of uncool for this population bubble and the stock has languished...but those kids- the Echo Boom- will have kids and will be looking for Disney style stuff for their kids and the stock will rise again if Disney maintains their brand identity for quality and family friendly---might take about 5 years from now but I expect the stock to be up considerably again....

 

[YoHo]

This isn't really true at all. Disney grerw the company throughout the 70s and 80s. When Generation X, a small generation with at Disney's target age. Disney's stock languished, because Card Walker was afraid to adjust prices at all. (as oposed to Eisner who took prices to the opposite extreme.)

Anyway, disney still grew in terms of turnstyle clicks and movie tickets sold despite the unfavorable small generation of Kids.

Unfortunatly, in the late 90s, Disney moved from a broadbased brand strategy into a nitch strategy with it ancillary products. Rather then market a vacation for all, they've spent their money on only the most fanatical of fans (DVC) and the constant price hikes with relativly few capital improvments have made them appear to be an overpriced vacation rather then an expensive but well priced vacation.

Their film production side has been generally terrible. They've been gunshy on big projects like Lord of the Rings, but then turned around and spent hunreds of millions on Crap like Pearl Harbor. Pirates was a shock given the general quality of Haunted Mansion and Country Bears.

They swallowed 5.1 billion to buy ABCFamily which will probably go down as the stupidest media move ever. I mean seriously, Rupert Murdoch probably still goes into giggle fits about this. Then they were forced to spend 7.1 billion on Pixar. Enought to rebuild WDW from the ground up, becuase they screwed their own animation group over in the course of 10 years.

And I haven't even started to talk about the foolishness of buying ABC in the first place, or the DCA/Disney studios Paris fiascos.

There's a lot that Iger needs to change still before the stock will even out. Blaming gas prices and fickle consumers is a cheap way out. They've put themselves in this dangerous position.

 

[1000th happy haunt]

I purchased 1600 shares of Disney stock about three years ago as part of my IRA. The current value (as of right now) is $5,000 more than I paid for it.

 

[Texowl2]

imagine if disney had taken on LOTR and Harry Potter. What great attractions could have been built at MGM or DL. On the other hand, Eisner and the rest of the overmanagers would have screwed those movies up royally.....

 

[brack]

I look at Disney and I see a stock whose price is the same as it was 10 years ago and who pays a crappy dividend and I can see no reason at all to buy it.

I bought my Disney stock not to get rich off the dividends but rather to support the place that I care a lot about. I bought more of the stock when it went through the toilet after 9/11 again not to make money but to show support for Disney.