By Jon Swartz
Walt Disney Co. shares were up 1% Thursday despite a stinging research note that downgraded the company’s stock and lowered its price target as it grapples with the spreading coronavirus pandemic.
“Disney /zigman2/quotes/203410047/composite DIS +0.47% has been particularly hard hit by the pandemic, impacted across virtually every segment of the company,” Guggenheim analyst Michael Morris said in a note Thursday that significantly shaved earnings estimates. He slashed his EPS for Disney to $2.94 in fiscal 2020 from a previous $5.20; in fiscal 2021, his EPS estimate plunged to $4.27 from $5.90.
Morris downgraded Disney to neutral from buy, and whacked his price target to $100 from $160.
The impact of COVID-19 has been withering, forcing Disney to indefinitely shutter its signature parks in the U.S., Europe, and Asia; temporarily close production of its live-action movies; stop its cruise business; and all but eliminate sports programming on its ESPN property.
“We have lowered our revenue and operating profit estimates across all segments, with parks and resorts closures driving the most significant changes,” Morris wrote. “In addition, we anticipate advertising pressure at media networks and lost profits due to the suspension of both feature film production and theatrical releases.”
The short-term impact on Disney’s financial performance and stock price will be severe, he adds, but his long-range outlook on the Magic Kingdom remains bullish. “Disney is a tremendously valuable collection of physical and intellectual property assets and our long-term view of industry-leading value creation potential is unchanged,” Morris wrote.
For now, however, Disney shares are taking a beating. They’re down 28% since Feb. 24. In that same period, the broader S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.48% is down 23%.
There is a plus to Disney’s current state of affairs: Its streaming service, Disney+, continues to perform well as millions of Americans are required to stay home under shelter-in-place programs. Streaming services from rivals Netflix Inc. /zigman2/quotes/202353025/composite NFLX +1.52% , Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.10% , Comcast Corp. /zigman2/quotes/209472081/composite CMCSA +0.13% , and Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +1.72% are also expected to benefit.