Everyone is getting picky when it comes to Mickey these days. Shares of Walt Disney (DIS -0.12%) have fallen out of favor with the investing community, failing to crack above the triple-digit price ceiling for more than a month. Analysts aren't waiting around to see if things will end happily ever after in this seemingly abandoned fairy tale.
Disney stock is trading just 12% above its nine-year low. Normally this would be a dinner bell. A top dog in entertainment -- if not the top dog -- and the shares are currently fetching a forward earnings multiple in the mid teens. However, instead of backing up the truck, investors are backing up the moving truck.
A pair of pessimistic analyst notes on Wednesday are a sign of the times. Disney may be down, but it's certainly not out. The House of Mouse is not a broken home, even if the stock chart comes at a sharp contrast to an otherwise resilient market these days.
A tale of a downward-moving stock chart
Let's start with Kannan Venkateshwar at Barclays lowering the stock's price target from $107 to $88, an odd sight with so many analysts bumping their price goals higher to keep up with rising names. The media giant has been up on blocks lately, essentially flat over the past year as well as year to date. Venkateshwar doesn't see Disney marching in place as a good sign or a matter of becoming more attractive relative to the rest of the market.
The analyst is holding out hope for a potential rebirth of Disney's long-term growth narrative, conceding that the concrete plans to make that happen just aren't evident at the moment. The near-term outlook is even more problematic. Venkateshwar sees estimate risk here, and that makes sense as other Wall Street pros have been inching their profit targets for fiscal 2023 and 2024 lower in recent months.
Image source: Disney.
You also have Laura Martin at Needham chiming in with a cautionary note. Martin is sticking to a neutral rating on the stock, but notes how investor sentiment has clearly turned bearish in recent weeks. Last week's abrupt departure of CFO Christine McCarthy didn't help restore confidence in Disney, especially with CEO Bob Iger set to step down by the end of next year.
Disney could be in the wrong place at the wrong time, as linear television fades in popularity. The writer strike that began early last month may be a near-term benefit to Disney's bottom line, but there will be a price to pay for the lack of new content generation. However, none of the lesser media companies with weaker empires and more wobbly ecosystems are trading this close to a multiyear low. The stock market has stepped up, leaving Disney shares in a cryogenic time capsule.
With another disappointing multiplex premiere last weekend and Disney+ subscribers worldwide contracting, the media stock bellwether isn't at its best right now. Top-line growth will be meager for now, and the bottom-line gains are at the mercy of Iger's plan to shave $5.5 billion in annual savings from Disney's bloated operations.
The market doesn't approve, given the lackluster stock chart and problematic analyst updates. Underestimating Disney is a mistake. As the operator of the world's most visited theme parks and the owner of some of the more beloved entertainment franchises Disney can't stay out of the spotlight for long. Consumers aren't shying away from spending on Disney-crafted entertainment and experiences, and the cost cuts will drive sizable improvements to the bottom line. It's a scary time, but turn the page. The story gets better.
