Disney Falls on Guggenheim Downgrade

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Shares for The Walt Disney Company (DIS) fell by astir 3% aft analysts astatine concern steadfast Guggenheim Partners downgraded the banal implicit concerns for the company's aboriginal nett growth. Disney, which reports net connected Feb. 9, closed trading astatine $155.44 connected Jan. 13. As of this writing, the banal is changing hands for $151.13. 

Key Takeaways

  • Disney banal is falling due to the fact that it was downgraded to Neutral from Buy by concern steadfast Guggenheim Partners.
  • The steadfast cited the menace of caller COVID variants disrupting operations and the amusement behemoth's accrued contented walk arsenic reasons for its downgrade.
  • Out of 17 analysts covering Disney, 14 person inactive rated it a Buy for 2022.

Why Did Guggenheim Downgrade Disney? 

Analysts astatine Guggenheim downgraded Disney banal to Neutral from their earlier Buy rating. They besides chopped the firm's price target connected Disney shares to $165 from $205 owed to "broader concern pressure." Elements of this unit see higher wages for workers and the menace of aboriginal COVID outbreaks affecting attendance successful its Parks division.

Guggenheim besides cited accrued contented spending by the amusement behemoth arsenic a crushed for its downgrade. In an earlier filing, Disney had said that it plans to summation contented spending by $8 billion, to $33 billion, successful 2022. 

Guggenheim stated that the existent trading terms for Disney, astir 17 times its expected 2023 earnings, values the institution adjacent to its just estimate. "While we judge the worst of the wide bear-case communicative is understood (digital maturation challenges, parks inclination volatility and outgo inflation), we inactive spot shares arsenic adjacent to reasonably valued," Michael Morris, Guggenheim analyst, wrote successful the note.

Is Disney Still a Buy? 

After crashing to a debased of $96.60 during the pandemic's onset, Disney registered 18% maturation successful its banal terms successful 2020. The adjacent twelvemonth was challenging, however. Subscriber maturation astatine Disney Plus, which had powered astir each its gains during the pandemic shutdown, slowed. New COVID variants interfered with the company's plans to afloat reopen different spigots of concern revenue, including its taxable parks and theaters. As a result, the banal fell by 14.5% and became the Dow Jones Industrial Average's worst performer successful 2021. 

Despite the challenging circumstances, Disney could inactive look connected apical this year. Of the 17 analysts covering the company, 14 person a "Buy" standing connected the stock. Earlier this month, Wells Fargo elder expert Steven Cahall told CNBC that 2021 was a "rare but wide strategical misstep" for Disney. Cahall, who has selected Disney arsenic his Top Large Cap Pick of 2022, said that Disney did not person the level of contented that its peers successful the streaming concern did and that it showed successful 2021.

With its accrued contented walk successful 2022, the institution should marque up for that gap. "It's not rocket science. You enactment a batch of contented retired determination and radical volition motion up to ticker it," helium said, adding that much contented gives Disney "more shots connected goal." While operations astatine the company's Parks part were hamstrung owed to caller COVID variants, Cahall is expecting a rebound this year. He has a terms people of $196 for Disney stock.

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