Wall Street Downgrades Disney Stock to "Sell"

Here's something you don't see everyday: A doom and gloom prediction for Disney. Wall Street analyst Rich Greenfield of Pali Research says that recent bad luck (by Disney's standard) has led him to lower the stock rating from "neutral" to "sell," and he has dropped the 12-month price target on Disney to $12.50 a share. Greenfield has done research on this company in the past, so he's incredibly familiar with its assets and trends. He says that the film division in particular is weak for The House of Mouse, and points to the slow business for Jonas Brothers: The 3-D Concert Experience and the relatively soft performance by Bolt as primary factors. He wrote, "essentially everything is going wrong at the same time, with the length of pain likely to extend further than we had previously expected." The analyst pointed out that Disney had shored up its theme park business in recent months, but only enough to meet a short- term economic crisis.

"The real problem for Disney becomes what happens if the economy does not begin to recover in the near-future, meaning Disney laps the benefit from these successful strategies leading to a continued slide in 2010 revenues and profitability; implying that 2009 will NOT be the trough by any means for the parks."

Disney has already cut hundreds of jobs in its TV division, around the same time CEO Robert Iger earned about $39 million in salary, incentives, and bonuses. We reported that story back in early February. Does all of this news put more pressure on the next few Disney movies to be major successes? In a word, yes. With TV revenue down, the most logical flow of big money is through box office receipts and DVD sales. This weekend, Disney has Race to Witch Mountain, and that didn't exactly cost a little bit of money. That's a fairly expensive piece of property. The studio should cash in on next month's Hannah Montana flick, but a heavy burden now rests on the shoulders of Up. We don't have budget numbers for it, but the average price of the last three Pixar movies is $150million before advertising is factored in, and Disney is really going to need a home run with this one in the first part of summer to keep that economic forecast from becoming more desperate heading into next year. As Greenfield warned, it is "increasingly hard to imagine the world economic landscape improving enough to drive Disney’s fiscal 2010 earnings."

Comments

[Will]

But my dividend checks with Micky Mouse on them are sooooooooo cute!

[Linda Wright]

What are you Kidding me go pick on someone else Mickey is the Best Movies Parks you ar just one oppion and I know lI have been to the Park 86 times. You are just another Wall Street Guy who has caused all this problem so shut up we are all sick to death of you guys