Market Overview

No Longer A Blue Chip? Atlantic Equities Downgrades Disney Amid ESPN Concerns

Share:
No Longer A Blue Chip? Atlantic Equities Downgrades Disney Amid ESPN Concerns
Related DIS
Fast Money Traders Share Their Picks In The Media Sector
Star Wars Vs. Harry Potter Vs. Marvel: An Intellectual Property Battle
9 Dividend Increases: November 28-December 2, 2016 (Seeking Alpha)
  • The share price of Walt Disney Co (NYSE: DIS) has declined 19.85 percent over the past six months, to a low of $92.54 on January 20.
  • Atlantic Equities’ Hamilton Faber has downgraded the rating on the company to Neutral, while lowering the price target from $148 to $104.
  • Although the stock has historically been considered a “safe haven” in a volatile market, Faber believes that given the various sector structural issues, the stock should not be counted among the blue chip names.

Analyst Hamilton Faber went on to state, “With strong pricing, we believe ESPN profits can remain relatively flat over the next five years but, in the absence of a convincing DTC model, declining subs will lead to significant profit contraction at the unit over the following five years.”

Although robust near-term pricing growth is likely to help profits continue to be broadly flat for the next five years, average growth after this time frame is expected at -12 percent, with ESPN moving into the red after that.

Related Link: Disney's ESPN Subscriber Numbers Concern May Be Overhyped

ESPN May Move Into The Red; What It Could Mean For Disney

“To offset this, the company needs to develop a convincing direct to consumer model and it seems there are five years to do this before ESPN starts to become a drag,” according to the Atlantic Equities report.

The underlying subscriber estimates for ESPN have been modified to assume a 2 percent per year contraction in U.S. pay TV market, from the earlier 1.5 percent. Faber also expects ESPN to continue to lose penetration, declining from 92 percent in 2015 to 85 percent in 2019.

The EPS estimate for 2016 has been slightly lowered from $5.66 to $5.64, while the EPS estimate for 2017 has been reduced from $6.40 to $6.22.

Image Credit: Public Domain

Latest Ratings for DIS

DateFirmActionFromTo
Nov 2016Deutsche BankUpgradesHoldBuy
Nov 2016BarclaysUpgradesUnderweightEqual-Weight
Nov 2016Pivotal ResearchDowngradesBuyHold

View More Analyst Ratings for DIS
View the Latest Analyst Ratings

Posted-In: Atlantic EquitiesAnalyst Color Downgrades Price Target Top Stories Analyst Ratings Tech Trading Ideas Best of Benzinga

 

Related Articles (DIS)

View Comments and Join the Discussion!