Walt Disney Stock Hits 52-Week Low as U.S. Markets Open Lower

NEW YORK - Shares of the Walt Disney Co. fell to a new 52-week low in early Wednesday trading as U.S. stock markets opened sharply lower. After Tuesday afternoon's latest quarterly earnings, Wunderlich Securities analyst Matthew Harrigan cut his rating on the company's stock on Wednesday from "buy" to "hold" and his price target from $42 to $39, citing studio concerns, ESPN and theme park costs and financial guidance that he said was "less than magical." And Nomura analyst Michael Nathanson reduced his Disney stock price target by $3 to $42 and lowered his earnings estimates. "Recently, Disney has not lived up to the earnings-beatings behavior it is known for," he wrote. "Although inexpensive, given both the high quality of its cable assets and low park profitability, the stock is likely to be range-bound unless the macro outlook brightens or earnings begin to beat expectations again." As of 10am ET, Disney shares were down 11.6 percent at $30.68 after earlier hitting a 52-week low of $29.60. Other big entertainment stocks also fell, with CBS Corp. down 3.8 percent and Time Warner 3.9 percent lower to also hit another 52-week low - a day after already doing so. The broad-based S&P 500 index was down 2.8 percent half an hour into the trading day. Disney management, led by CEO Bob Iger, said Tuesday that higher TV programming spending at ESPN and ABC, lower TV licensing at the broadcasting unit and tough studio comparisons will affect profit in the current quarter by 7 cents per share. "The 7 cents earnings albatross guidance for the fiscal fourth quarter, largely off studio comps and ESPN cost hikes (as well as year-over-year ABC syndication), may be more indicative of long-term business stresses than timing," Harrigan said. "Notwithstanding franchises, such as Pirates and Disney Pixar, the studio is showing poor relative ability to monetize its creative output relative to Warner Bros. and 20th Century Fox," he continued. "Management commented on the call that retransmission receipts inclusive of license fees from affiliate stations could reach $400 million to $500 million by fiscal 2015. This equates to 35 cents to 40 cents on a monthly basis per U.S. multichannel home, well below the $1 per month all-in bogey suggested by News Corp. COO Chase Carey, albeit with the latter in a better ratings position among 18-49 year-olds in prime-time, and with ABC admittedly lacking marquee sports programming." But Miller Tabak analyst David Joyce said "there's no good reason" for Disney's sharp decline on Wednesday. "The company is seeing positive broadcast and cable network ad revenue, and parks hotel bookings minus 2 percent is actually better than they've forecast in previous earnings calls," he said. Email: Georg.Szalai@thr.com Twitter: @georgszalai Related Topics Bob Iger The Walt Disney Company earnings