Topline
Disney stock slid Wednesday after the company warned about softness in its cash cow parks division during its morning quarterly earnings update, sending shares to a new 2024 nadir as the entertainment conglomerate grapples with an extended slump on Wall Street.
Disney stock slumped Wednesday.
Key Facts
Shares of Disney fell almost 4% to just above $86 by late afternoon, registering their lowest intraday level since Nov. 8, 2023, despite reporting quarterly profits and revenue above consensus analyst expectations before market open.
The decline, which came amid milder index-level losses, followed Disney management’s warnings about a weakening consumer, flashing red to a market already on edge about concerns of a global economic slowdown.
In its earnings release, Disney warned about U.S. “demand moderation” for its Experiences unit, which covers theme parks and accounted for about 52% of Disney’s global operating profit last quarter, and Disney CEO Bob Iger warned analysts they’ve seen evidence “the lower income consumer is feeling a little bit of stress,” alluding to tighter discretionary spending.
Several other notable companies slumped on the stock market Wednesday after reporting earnings late Tuesday or early Wednesday, including Airbnb (shares down 14%), Amgen (-6%), Lyft (-15%) and Super Micro Computer (-20%).
Chief Critic
Daiwa analyst Jonathan Kees wrote to clients he had a “positive impression of results” despite the “emotional investor reaction” to Iger’s comments on softening demand.
Key Background
The latest drop sends Disney stock further into its yearslong rut. Its Wednesday share price of $86.31 is almost exactly the same as it was 10 years ago, closing at $85.51 on Aug. 7, 2014, a period in which the S&P 500 is up more than 170% (accounting for dividends, Disney has returned 11% compared to the S&P’s 230%). Disney stock’s performance lags even since Iger’s widely celebrated return to the chief executive post in November 2022, with shares returning -5% since Iger’s return from a two-year hiatus, compared to the S&P’s 36% positive return, according to FactSet data. Disney stock’s headaches coincide with broader struggles for legacy media companies, as stocks like Fox (14% return over last decade), NBCUniversal parent Comcast (83%), and CBS parent Paramount (-78%) all grossly underperformed the broader market. Shares of streaming leader Netflix have gained more than 800% over the last decade, but the stock has taken its lumps, too, still trading about 10% below its 2021 peak.
Contra
Disney still has plenty of fans on Wall Street, and the three dozen analysts tracked by FactSet have an average price target of $122 for the stock, about 40% above its current share price. Rosenblatt analyst Barton Crockett, who lowered his price target from $129 to $122 following earnings but still has a buy rating for Disney, noted the company has “meaningful asset value.” And Disney stock is trading at its cheapest relative level since March 2020, according to its price-to-earnings ratio (P/E), which measures consensus profit estimates over the next 12 months compared to the company’s share price. Disney’s 16.3 P/E is about 35% lower than it was as recently as April, signaling decreased confidence across the market in the company’s ability to grow earnings but also a discount for those who believe in a further turnaround.
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