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Disney Stock Downgraded by Atlantic Equities, Forecasts Downturn in Key Segments
Lower Advertising Expectations and Underperforming Franchises Fuel the Downgrade
Atlantic Equities has downgraded Disney stock to underweight and revised its price target to $76 per share, a 12.2% decline from the previous close. Analyst Hamilton Faber cited lower advertising expectations and disappointing performance from some of Disney's franchises, including Marvel, as the reasons for the downgrade. Faber noted that box office performance has also struggled since the 2019 Avengers: Endgame series climax, and there are concerns about Marvel's ability to recreate that success in 2026. The recent "Antman" installment experienced the biggest second-week box office drop in Marvel Studios history, while this year's "Guardians of the Galaxy" film was a success with over $800 million in box office revenue.
Headwinds for Disney's Direct-to-Consumer Segment
In addition to the challenges in the franchise and box office performance, Atlantic Equities also pointed out potential headwinds for Disney's direct-to-consumer segment, which includes Disney+. Faber highlighted the sluggishness of advertising spending, which could impact the segment's growth. Reports indicate that entertainment pricing has declined by as much as 5% during the current upfront, and with general entertainment linear TV ratings continuing to decline, advertising is expected to fall faster than in previous years. These factors pose a significant risk to Disney's direct-to-consumer segment.
Stock Performance and Outlook
Disney stock has experienced a slight decline of less than 1% since the beginning of the year, underperforming the S&P 500's 18.6% gain. The downgrade from Atlantic Equities reflects concerns about Disney's key segments, including underperforming franchises and potential challenges in the advertising market. These factors could put pressure on Disney's stock moving forward. Investors will be closely watching for any signs of improvement in the company's performance and strategic initiatives to address the issues raised by Atlantic Equities' analysis.
Conclusion: Impact on New Business
The recent downgrade of Disney stock by Atlantic Equities and the forecasted downturn in key segments have significant implications for new businesses entering the entertainment and media industry. As Disney, a media conglomerate with a strong foothold in the market, faces challenges in its advertising expectations and underperforming franchises, it highlights the need for new businesses to have a solid understanding of industry trends and consumer preferences.
One key takeaway from this development is the importance of strategic planning and diversification. New businesses should carefully analyze the market and identify potential headwinds, such as declining advertising spending and changing consumer behaviors. This foresight can enable them to develop well-rounded strategies that mitigate risks and capitalize on emerging opportunities.
Furthermore, the downgrade serves as a reminder that even established industry giants are not immune to setbacks. It emphasizes the need for resilience and adaptability in the face of changing market dynamics. New businesses should focus on agility, being open to adjusting their strategies as needed, and staying attuned to consumer demands.
Additionally, the underperformance of Disney's direct-to-consumer segment highlights the importance of building a strong online presence and tailoring offerings to meet evolving consumer preferences. As traditional linear TV ratings continue to decline, new businesses should prioritize investing in digital platforms, creating engaging content, and implementing effective marketing strategies to capture a larger share of the increasingly competitive direct-to-consumer market.
In conclusion, the downgrading of Disney stock offers valuable insights for new businesses entering the entertainment and media industry. By being proactive, adaptable, and consumer-focused, these businesses can navigate potential challenges and position themselves for success in an ever-changing market landscape.
Article First Published at: https://www.cnbc.com/2023/07/25/sell-dis-amid-falling-marvel-popularity-atlantic-equities-says.html