Disney Stock Slips on Downgrades From Credit Suisse, UBS

The Walt Disney Company began furloughing nonessential employees on Sunday

Shares in The Walt Disney Company are declining once again this morning after analysts at Credit Suisse and UBS downgraded the stock.

At the time of this writing, DIS shares were trading down about 4%, or more than $4 apiece.

Disney began furloughing nonessential employees on Sunday.

Below is a snapshot of Monday morning’s downward movement. We selected a five-day window to best demonstrate the latest decline.

DIS stock snapshot 4-20-20
Yahoo Finance

In late 2019, Disney stock was trading as high as $153.41. Last month, it fell as low as $85.76.

UBS analyst John Hodulik downgraded Disney stock from a “buy” to “neutral.” Credit Suisse’s Doug Mitchelson also arrived at “neutral,” though his rating is down from an “outperform” label.

Hodulik wrote: “We are downgrading shares of The Walt Disney Company to Neutral and lowering the price target to $114 given the COVID-19 outbreak and subsequent weakness in the economy. While the Media/Studio businesses will see declines, Parks are the largest source of earnings revisions. … Park re-opening now Jan 1 base case; profitability likely impaired until vaccine. We believe Parks’ profitability will be impaired for a longer period of time given the lingering effects of the outbreak and now assume an opening date of Jan. 1 as our base case. That said, the economic recession plus the need for social distancing, new health precautions, the lack of travel and crowd aversion are likely to make this business less profitable until there is a widely available vaccine.”

Hodulik added that the shutdown of live sports has also impacted Disney, whose ESPN and ABC would normally be airing the NBA playoffs right about now. “Postponement or cancelation of the NFL or college football would be another blow and likely impact affiliate revenues given greater cord-cutting and distributors’ reluctance to pay.”

Mitchelson was a bit less apocalyptic about Disney’s overall future, even if he described the company’s near-term outlook. “We expect Disney will remain in a more narrow trading range given a remarkable lack of operational visibility, expected severe cuts coming to street estimates, and a now more equally balanced mix of positive and negative catalysts.” He added that “we continue to see a path to ~$160/share for Disney the next few years – streaming value creation should easily outstrip linear TV declines, and we expect a full rebound in theme park and Hollywood operations over time.”