The Walt Disney Company will suffer a $200 million write-down, but most analysts still rate the stock a “buy”
Despite the carnage, investment analysts still have faith in the Disney brand and the company’s stock price has remained stable.
“It doesn’t effect Disney’s cash position,” Tony Wible, an analyst at Janney Montgomery Scott, told TheWrap. “It is a backward looking event and Wall Street is more focused on what Disney has ahead of it.”
That the money folks remain relatively sanguine about the company’s fortunes is somewhat surprising, because nobody accurately predicted how big a bomb “John Carter” would be.
Disney acknowledged the extent of the film’s failure on Monday when it announced that its lackluster box office performance will force the company to take a $200 million write-down.
The studio side of Disney’s operations is projected to lose between $80 million to $120 million for the quarter, far worse than even the most dire forecasts had predicted a week ago.
But while the sense of schadenfreude around Hollywood may be thick, Wall Street analysts were relatively non-plussed about all the red ink.
The prevailing belief is that Disney is a sprawling enough company to absorb the losses.
Most analysts maintained their “buy” rating for the company’s stock, citing the relative strength of Disney’s theme parks division and the enormous retransmission fees its cable networks command.
“The theme parks and ESPN renewals are producing far more revenue than what the studio will contribute,” Wible said. “This is more of a one-time item.”
The share price for Disney stock dipped .46 percent on Tuesday to close the day at $43.26. Given the magnitude of the bomb, that was a relatively painless blood-letting.
There is also great optimism among investors about a summer movie slate filled with two big releases from the company’s Marvel and Pixar units, “The Avengers” and “Brave.”
“There is no change to my expectations about how well ‘The Avengers’ will do or how well ‘Brave’ will do,” Todd Juenger, an analyst for Sanford C. Bernstein & Co., told TheWrap.
“What you look at as an investor is a studio’s portfolio over time, and on average I think it is more likely that Disney’s films will deliver more value to investors than other studios, largely because of the way they monetize their movies with consumer products,” he added.
The investing crowd will stick around, provided this quarter is an exception, not the rule.