Analyst Kannan Venkateshwar downgraded Disney stock to equal weight from overweight in a note to clients on Monday. Disney stock forecast is seeing the company’s long-term subscriber goals appear optimistic.
“The launch of Disney+ has been the most successful streaming launch ever, which is remarkable given that the company accomplished this with very little new content,” according to the note. “However, despite the launch of new franchise titles, day and date movie releases, and Star+ this year, Disney+ growth has slowed significantly.” Part of this slowdown could be due to growth being pushed forward into 2020 and promotional rolloffs, but we believe it could also be due to structural factors stifling growth.”
Disney stock reported in August that it had 116 million subscribers for Disney+ and Hotstar, its international arm, as of July 3, a year-over-year increase of more than 100 percent. The company also had over 57 million combined Hulu and ESPN+ subscribers.
However, Disney+ is producing significantly less new content than Netflix, and the Hotstar service in India faces a significant risk due to expiring cricket sports rights, according to Barclays.
We believe this will be difficult…. As a result, we lower our estimates for Disney+Hotstar subs to 200mm in 2024, versus the 250mm guidance midpoint,” the note stated.
Barclays reduced its price target for Disney from $210 to $175 per share. On Friday, the stock closed at $176.46 per share. The firm also reduced Disney’s fourth-quarter and 2022 earnings estimates.
Disney shares have gained nearly 40% in the last year, but have since retreated and traded sideways since peaking in mid-March.
Disney still has a hope
Before the opening bell on Wall Street, Barclays downgraded Disney from overweight to equal weight, citing the company’s long-term streaming subscriber goals as overly optimistic.
Cramer’s charitable trust sold its Disney stock over the summer but repurchased it in September.
The “Mad Money” host compared the Barclays downgrade to concerns about Netflix last year. Following the recent success of new international content, including the hit series “Squid Game,” investors have become more bullish on Netflix.
“I just think the idea of Disney being called finished means that… Disney+ can’t come up with anything,” Cramer said, adding that he disagrees.
He did, however, state that Disney “has their work cut out for them” in order to catch up to other streaming services.
Barclays expressed concern about Disney stock’s long-term viability, particularly in comparison to more successful streaming services. Disney shares have risen about 35% in the last year, but have slowed since a peak in March. The stock is down 5.5 percent year to date, after closing down 3 percent on Monday at $171.14 per share.
According to Cramer, unlike other streaming services, Disney also owns theme parks and has other ways of reviving the stock.
“Perhaps you don’t need everything going at once,” he suggested. “I’m a devoted Disney fan, and I believe that this is a fantastic long-term story.”
As of July 3, Disney reported 116 million subscribers to Disney+ and Hotstar, its international arm, in August. This is more than double the number from the previous year.
The company also has over 57 million combined Hulu and ESPN+ subscribers.
