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Dow Jones News: Disney Stock Downgraded; Intel May Acquire Moovit

By Timothy Green – Updated May 4, 2020 at 2:36PM

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Disney may be in for a prolonged downturn, and Intel is reportedly considering a $1 billion acquisition.

As some U.S. states and cities begin to allow parts of their economies to reopen amid the novel coronavirus pandemic, uncertainty reigns supreme. Retailer J. Crew Group filed for bankruptcy protection on Monday, the first national retailer to be brought down by the pandemic. More bankruptcies, in retail and in other industries, are likely as it continues to take its toll on the U.S. economy. The Dow Jones Industrial Average (^DJI 2.80%) was down 0.93% at 10:55 a.m. Monday.

Shares of Disney (DIS 4.46%) slumped to start the week after an analyst warned about a slow recovery for the entertainment giant. Meanwhile, shares of Intel (INTC 2.71%) were down only modestly as the company reportedly weighs a $1 billion acquisition.

Disney downgraded on pandemic uncertainty

While the Disney+ streaming service is proving to be a big hit for the entertainment conglomerate, an analyst at MoffettNathanson downgraded Disney stock on Monday due to weakness in its other businesses. Analyst Michael Nathanson sees pandemic-related uncertainty creating a significant earnings risk for the foreseeable future.

A castle at a Disney park.

Image source: Disney.

Nathanson knocked down his rating on Disney stock from buy to neutral, and he lowered his price target from $120 to $112. The analyst expects the economic impact of the pandemic on Disney to last longer than most expect, particularly given the risks associated with a second wave of the virus.

Currently Disney's U.S. parks are closed due to the pandemic. Movie theaters across the country are also shuttered, eliminating Disney's ability to release new films outside of digital channels. In fiscal 2019 the parks, experiences, and products segment accounted for 38% of Disney's revenue, while the studio entertainment segment brought in 16% of revenue.

Nathanson sees the parks segment suffering a 33% revenue decline this fiscal year, which ends in September. The analyst doesn't see a rebound until fiscal 2022. Earnings before interest and taxes for the segment will drop by 65% this year, according to Nathanson's estimates. For the movie segment, Nathanson predicts a 23% revenue decline and a 20% profit decline in 2020.

How much Disney suffers this year depends on when the company is able to reopen its parks, the severity of a second wave of the virus, and consumers' appetite for air travel and crowded environments. It's not hard to imagine potential guests putting off visits to Disney properties until the storm clears, even if the parks are open for business.

Shares of Disney were down 3.7% Monday morning. The stock is now down roughly 34% from its 52-week high. The company is scheduled to report its fiscal second-quarter results on Tuesday.

Intel considering a $1 billion acquisition

Over the weekend, it emerged that chip giant Intel was in advanced talks to acquire Moovit, an Israel-based start-up that publishes a free mobile app to help people plan journeys across various transit modes, including public transit, scooters, and ridesharing. The app is currently used by about 800 million people around the world.

Intel is reportedly expected to pay around $1 billion for the company, and the deal is expected to close in the coming days. While no one at Intel or Moovit has confirmed the talks, TechCrunch said that Moovit's spokesperson did not deny the reports.

The acquisition of Moovit could be beneficial to Intel's efforts in autonomous vehicles. While many challenges must be met before self-driving cars are truly ready for prime time, Moovit provides real-time traffic data and routing technology that could help the cause. In 2017 Intel paid $15.3 billion for Mobileeye, another Israel-based company focused on computer vision and machine learning for advanced driver assistance systems and autonomous driving.

Intel stock was down about 0.6% Monday morning. Shares of the chip giant are now down roughly 17% from their 52-week high.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Intel and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

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