March 28, 2023

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No magic for Disney investors

Stelter: Here's why right-wing media is demonizing Disney
Netflix stock (NFLX) It’s down more than 40% this year, before first-quarter earnings were released after the closing bell on Tuesday. Meanwhile, shares Disney (dis) It’s down about 15% so far in 2022. This makes Disney one of the worst performing companies in dawwhich is down just 4% this year.

Both companies have been plagued by concerns about the influx of competition and the fierce battle for subscribers.

economic inflation is a problem too. newly Report from the United Kingdom It showed that consumers are cutting back on streaming services due to concerns about price hikes, and that UK customers have been abandoning Disney+ at a faster rate than Netflix and Amazon (AMZN) Prime Video. (Disney also owns Hulu and sports streaming service ESPN+.)

Despite Disney’s huge library of movies and shows thanks to its own studio, as well as Lucasfilm, creators of Marvel, Pixar and Star Wars, investors worry that this glut of content won’t boost streaming subscription growth enough to offset the slowdown in traditional streaming. and cable TV companies.

“Disney+, Hulu and ESPN+ have the broad and managerial conviction to be, over time, a formidable global broadcaster,” JPMorgan analyst Philip Kosik said in a Tuesday report. But, he added, “that’s not necessarily as good a job as Disney’s work on television.”

Traditional media companies like Disney used to rely a lot on lucrative ad sales and affiliate fees from cable companies to move their channels, but the shift to streaming has turned that model on its head. Investors are now more interested in the margins flowing in and not just the bragging rights that come from the number of subscribers to the company.

“The market appears to be overtaking remunerative media companies, as it did in 2020 and 2021, simply for its expectations of future streaming subscriber growth,” MoffettNathanson analyst Michael Nathanson said in a report last month.

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“It now appears that investors are looking at further down the income statement — and also, finally, looking at the cash flow statement — to try and quantify the underlying steady-state profitability of the pivot for direct-to-consumer content delivery,” Nathanson added.

Nathanson cut his price target at Disney in March from $165 a share to $150, in part due to concerns about low profit margins.

The Florida controversy remains a problem for Disney

Disney has too criticism After CEO Bob Chapek in the beginning Refused to speak out against Florida ‘Don’t Say Like Me’ Billwhich prohibits schools from teaching students from kindergarten through third grade about gender identity and sexual orientation.
After criticism from Disney workers, Tangled eventually condemned the law. But some republicans they are now Disney threatens boycott While many Democrats feel that Chuck’s response came too late and had some heartbreak in days Former CEO of Disney, Bob Igerwho was more outspoken in defense of progressive issues.

Whether the Florida controversy has an actual impact on Disney+ subscriptions, attendance at Disney-owned ABC and ESPN movies, theme parks and ratings is up for debate.

However, one analyst noted that the “Don’t Say Guy” case could harm the company in another way, if more liberal Hollywood celebrities decide not to work with the House of Mouse.

“One of the most important [Disney] The origin is her brand, then her talent. “If the controversy leads to a loss of key creative talent, it will obviously be a negative,” Alan Gould of Loop Capital said in a report earlier this month.

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Whatever happens, it’s clear that Wall Street hasn’t been satisfied with Disney’s performance since Tangling took over from Iger in February 2020.

Disney shares are now hovering near their lowest levels since November 2020. Undoubtedly, Tangle has taken a bad hand since his tenure coincided with the onset of the Covid-19 pandemic in the United States, an event that significantly slowed tourism and leisure activities such as going to watch movies.

Disney should have a big event in 2022 at the box office

But some hope Disney can turn things around soon.

Michael Morris of Guggenheim Securities wrote in a report late last month that the park business should rebound thanks to new attractions like “Star Wars: Galaxy’s Edge” and “Avengers Campus,” increased visits from foreign travelers to major resorts in Orlando and California, and the reopening of the parks. International and entire cruise lines.

JPMorgan’s Cusick cited Disney’s strong slate of films this summer and later this year as positive.

Box office revenue should start to pick up thanks to the upcoming releases of Marvel’s Dr. First sequel to “Avatar” released in 2009 (Avatar 3 will follow in 2024)

Disney’s Marvel, along with partner Sony, have proven that movie fans will be returning to movie theaters in droves for blockbuster blockbusters. Last year’s “Spider-Man: No Way Home” is 3rd highest grossing movie ever in the United States.