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Disney's Challenges and Wall Street's Expectations: An In-Depth Analysis
Disney's Turbulent Times
Disney, the entertainment behemoth, is currently navigating a stormy period marked by a series of challenges. The company has grappled with inconsistent box office performance and an ongoing strike involving Hollywood's actors and writers. In addition, Disney's stock performance has been relatively flat, with a modest increase of about 1% in 2023.
Upcoming Fiscal Third-Quarter Results
Disney is set to release its fiscal third-quarter results following the close of trading on Wednesday. Analysts, according to Refinitiv, are predicting earnings of 95 cents per share on revenue of $22.5 billion. Notably, Disney has surpassed revenue consensus estimates in 12 of the last 20 quarters, as reported by StreetAccount.
Wall Street's Anticipation and Predictions
Investors are keenly awaiting management's perspective on the current quarter and the rest of the year. Additionally, Penn Entertainment recently announced a partnership with Disney's ESPN to rebrand and relaunch its sportsbook as ESPN Bet.
Analysts' Revised Forecasts
Ahead of Disney's quarterly announcement, several Wall Street analysts have revised their performance predictions downward. Goldman Sachs, for instance, has maintained its buy rating on the stock but slightly reduced its price target from $130 to $128, reflecting lower estimates.
Analysts Highlight Potential Hurdles
Goldman analyst Brett Feldman points to several obstacles, including a reshuffled theatrical lineup for 2023 and 2024 and the planned closure of Disney World's Star Wars: Galactic Starcruiser hotel.
Pressure in Advertising and Parks Performance
UBS analyst John Hodulik also maintained a buy rating on the stock but acknowledged ongoing pressure in advertising and mixed performance in Disney's Parks segments. He set a price target of $122 on Disney shares, suggesting a potential 38.4% upside.
Concerns Over Advertising Decline and Labor Strikes
Evercore analyst Vijay Jayant and Morgan Stanley's Benjamin Swinburne both cited the decline in advertising and the Hollywood labor strikes as significant challenges for Disney. Swinburne further noted that "Linear TV pressures and a maturing streaming market lead us to lower our DIS/WBD/FOXA/PARA estimates."
Lowered Price Targets and Fiscal Year Guidance
Deutsche Bank analyst Bryan Kraft also lowered his price target due to reduced advertising revenue and box office underperformance. He expects Disney's management to lower its fiscal year guidance, a move that he believes is already factored into the stock price.
In conclusion, Disney faces a number of challenges that it must navigate successfully, including cyclical and secular advertising pressures, as well as the impact of the writers and actors strikes. These factors could significantly influence Disney's fundamental outlook.
Implications for New Businesses
Disney's current challenges and Wall Street's expectations offer valuable lessons for new businesses.
Understanding Market Dynamics
The entertainment giant's struggle with inconsistent box office performance and labor strikes underscores the importance of understanding market dynamics and external factors. New businesses must stay abreast of industry trends and potential disruptions to navigate turbulent times effectively.
Financial Performance and Investor Expectations
Disney's flat stock performance and the revised forecasts from analysts highlight the critical role of financial performance in shaping investor expectations. New businesses must focus on financial management and strategic planning to meet investor expectations and maintain a positive market perception.
Adapting to Changing Advertising Landscape
The decline in advertising revenue faced by Disney signals a changing advertising landscape. New businesses, particularly those in the media and entertainment sector, must adapt to these changes and explore innovative advertising strategies to sustain revenue growth.
In conclusion, while Disney's challenges may seem unique to its size and industry, they offer universal lessons for new businesses. Understanding market dynamics, managing financial performance, and adapting to changing advertising landscapes are crucial for any business aiming to thrive in today's competitive market.
Article First Published at: https://www.cnbc.com/2023/08/09/dis-how-to-trade-disney-stock-ahead-of-earnings.html
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