This is The Top Concern For Disney Stock
Walt Disney Co (NYSE:DIS) stock has been going down for a while, and it has lost about 13% over the last year. Although Disney remains a strong media conglomerate with solid fundamentals, DIS stock has been facing pressure due to certain concerns surrounding its cable business.
According to the latest ratings data, National Football League (NFL) viewership has gone down by about 10% this season. This decline is more pronounced for prime-time games on Sunday, Monday, and Thursday. TV networks, including ESPN, have spent huge amounts of money on sports, in particular NFL. (Source: “Ratings Fumble for the NFL Surprises Networks, Advertisers,” The Wall Street Journal, October 6, 2016.)
The report also says that Walt Disney Co’s ESPN has experienced the biggest drop, down 17% to an average 11.3 million viewers. However, Disney has been facing a slowing ESPN for quite some time. Moreover, the network is paying massive fees for sports, which has raised the costs for the company.
Last month, Drexel Hamilton, LLC’s Tony Wible had lowered his rating on DIS stock to “hold” from “buy,” as he was quite concerned about the rising fees for National Basketball Association (NBA) sports content. He said that the company would soon face a massive increase in NBA costs, as the new season and deal terms take effect in October. (Source: “Top analyst downgrades Disney on rising NBA costs,” CNBC, September 26, 2016.)
Moreover, in an attempt to cut cable, more options to watch NFL games have come in, especially Twitter Inc (NYSE:TWTR), which is also affecting viewership and weighing on DIS stock.
Although Disney stock has been losing for the last year, it had more than tripled from October 2011 through October 2015. The following chart displays these phenomenal gains.
Chart courtesy of Stockcharts.com
Although there may be stress on Disney’s cable network at present, the entertainment giant’s other businesses are on a roll. As the trailer of Rogue One: A Star Wars Story makes its debut, expectations are that it will be another $1.0-billion movie for Disney this year.
Positive reports have come in about “Shanghai Disneyland” that opened this year in China, so investors will be looking forward to the developments in this high-growth market.
Most importantly, investors shall look forward to what strategies Walt Disney Co employs to maintain its dominance in this environment of cord-cutting. That is likely to have a big impact on DIS stock.