Shares of Disney (DIS) are slipping as weakness in the company’s parks division weighed on its third quarter results. However, the entertainment giant’s streaming division turned a profit for the first time ever. CFRA research director of equity research Ken Leon joins Catalysts to break down Disney’s third quarter earnings report and its overall outlook in a changing media environment.
After Disney’s earnings, CFRA lowered its price target on the company to $98 from $100 and reaffirmed its Hold rating. Leons explains, "It’s extremely difficult to get all of Disney’s businesses moving in the right direction for corporate growth. Additionally, moving into a softer economy and a consumer that is watching their budgets, the parks got hurt." He adds that while the streaming business turned a profit, "the numbers are very small. So in aggregate, they have a lot of challenges." Therefore, he does not see much opportunity for investors in the near-term as Disney struggles to align its businesses for positive growth.
He adds, "Shareholders are not getting healthy returns on investment or buybacks in a big way. It’s just really challenging against more streamlined companies like Netflix (NFLX) that are really ahead of the curve in this area of streaming. It’s a very tough area to compete." He argues that it has become increasingly difficult to "hold on and grow in the traditional areas for general entertainment," and does not expect Disney to report outsized growth in all of their areas for profitability in the fourth quarter.
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