were down on Friday after Guggenheim Partners downgraded the stock, citing concerns about slowing growth in the company’s direct-to-consumer and parks segments.
Analyst Michael Morris lowered Disney’s (ticker:
) to Neutral from Buy, and cut its price target to $165 from $205, reflecting an “updated view of the pace of earnings growth in the company’s direct-to-consumer and fleet businesses, which is now below consensus through FY2024.”
The data in the company’s annual 10-K record reflects a higher-than-expected increase in content spending, which could reach $33 billion in fiscal 2022, Morris said. This increase in spending could last until 2023 and beyond, he added.
Morris also lowered its operating profit forecast for the company’s parks segment to reflect the prolonged impacts of Covid-19.
“Overall, our view of park demand remains favorable and we view the business as a significant contributor to long-term value creation,” he wrote in a research note on Friday. “However, we believe that a slower return of international visits and inflationary pressures beyond management’s control are not fully reflected in consensus expectations.”
Despite margin pressures, Morris sees an upside in Disney’s movie and streaming services. It raised its estimate of domestic subscriber net additions for the first quarter, with most additions occurring late in the year as the company rolls out the streaming service to new international markets. The company could also be carried by tailwinds from the successful release of “Spider-Man: No Way Home.”
The stock fell 3.4% to $150.18 on Friday.
Write to Sabrina Escobar at [email protected]