Walt Disney (DIS) Shares Take a Hit as Guggenheim Downgrades to Neutral on Slower Profit Climb

Guggenheim analyst Michael Morris downgraded shares of Walt Disney (NYSE: DIS) to Neutral from Buy with a price target cut to $165.00 per share from $205.00.

The Neutral rating reflects Guggenheim’s “updated view of the pace of profit growth at the company’s direct-to-consumer and parks businesses, which is now below consensus through fiscal 2024.”

“While we believe the worst of the overall bear-case narrative is understood (digital growth challenges, parks trend volatility and cost inflation), we still see shares as close to fairly valued at 17x our 2023E EBITDA and 30x P/E, particularly ahead of what we expect will be downward consensus revisions,” the analyst said in a client note.

On a more positive note, the analyst sees a positive in the fact that Disney plans to increase the total 2022 programming spend by $ 8 billion. This is “under-appreciated in a consensus outlook that expects the DTC business to approach breakeven by fiscal 2023.”

“We do see positive business signs, including ahead of consensus F1Q22 Disney+ subscriber additions (our 10mm versus consensus 6.8mm) bolstered by Hulu + Live bundling. However, broader business pressure has us revisit our target 12-month valuation, now at $165 as detailed within,” Morris added.

Disney stock price is down 1.7% in pre-open Friday.

By Senad Karaahmetovic | [email protected]

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