Walt Disney shares were falling Friday after Guggenheim Partners downgraded the stock, citing concerns about halting growth in the company’s direct-to-consumer and parks segments.
Analyst Michael Morris lowered Disney’s (ticker: DIS) rating from buy to neutral, and lowered its price target from $205 to $165, which “profit growth in the company’s direct-to-consumer and park businesses.” Reflects the updated outlook for momentum, which is now below consensus through fiscal year 2024.”
Morris said data from the company’s annual 10-K filing showed higher-than-forecast growth in materials spending, which could amount to $33 billion in fiscal 2022. He said this expenditure increase could extend into 2023 and beyond.
Morris also lowered its forecast for operating income in the company’s Park segment to reflect longer-term COVID-19 impacts.
“Overall, our outlook for Park demand remains favorable, and we view the business as a significant contributor to value creation over the long term,” he wrote in a research note on Friday. “However, we believe that the slow return of international travel and inflationary pressures beyond management’s control are not fully reflected in consensus expectations.”
Despite margin pressures, Morris sees an upside in Disney’s film and streaming services. He dropped his estimate on domestic subscriber net ads for the first quarter, with most pairings occurring at the end of the year as the company rolls out the streaming service to new international markets. The company may also be buoyed by tailwinds from the successful release of “Spider-Man: No Way Home.”
The stock fell 3.6% to $149.91 on Friday.
Write to Sabrina Escobar at [email protected]