Financial analysts on Wall Street have recently downgraded Walt Disney Company stock amid poor performance from segments of the company’s business model. Analysts are concerned that the growth of Disney+ streaming has stalled, despite billions in investment from the entertainment company. Additionally, Disney’s theme parks have seen soft attendance as well.
Equity analysts at KeyBanc subsequently lowered their rating of Disney stock from “Overweight” to “Sector Weight.” The firm also gave a stock price target of $85, where shares of Disney closed Thursday near $89.
“Disneyland growth due to its 100th anniversary celebration is more than offset by [Disney World’s] contraction from comparisons against its 50th anniversary celebration. We worry the ‘tough comps’ are not properly reflected in consensus,” the report stated.
KeyBanc also pointed out that Disney’s new Star-Wars-themed hotel shut down just after a year of operation. The Galactic Starcruiser hotel closed its doors after not attracting enough business. The hotel came with high prices starting at $4,800 for two guests and $6,000 for families of four.
Furthermore, Disney+ subscriptions have fallen drastically in recent months. Disney is now having to focus on overseas growth in streaming subscriptions. The streaming services endured a loss of 4 million global customers during the first quarter of 2023.
The American Tribune recently reported on Disney enduring enormous financial losses on the company’s latest box office releases. A box office analyst recently calculated that Disney could have lost $890 million from the last eight blockbuster films it released to theaters.
The YouTube channel Valliant Renegade has closely analyzed the financial performance of recent Disney movies. The box office analyst decided to compile the aggregate performance of all the films to get an idea of Disney’s overall performance at the box office. The results of the analysis were dismal.
While looking at a high level, the gross box office earnings may seem strong. However, the company is taking significant losses when considering the cost of producing these films. Disney spends billions on producing, marketing, and promoting the films globally. Moreover, there is a split in the overall theatrical revenue between Disney and the movie theater, typically 50 percent in the United States and 75 percent in Chinese markets.
Valliant Renegade determined that Disney spent nearly $2.75 billion on the overall production and distribution of the last eight films and only brought in $1.86 billion in profit. According to this calculus, Disney is losing almost $900 million on these films. Adding insult to injury, Disney no longer licenses its content to third parties after a theatrical release.
Instead, Disney likely will exclusively upload the content to Disney+. As previously alluded, this is a streaming service with declining subscriptions. There is an opportunity cost to not licensing the content, which used to provide additional revenue once a movie had completed its time at the box office. This would have provided an opportunity to offset some of the losses Disney is experiencing at the box office.
Disney is also enduring financial woes from a corporate perspective. Last year, CEO Bob Iger announced a massive cost-cutting campaign that involved reducing expenses by $5.5 billion and firing 7,000 employees.
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