Disney Dealt Another Major Blow Amid Backlash: ‘A Losing Trade’
Disney’s stock was downgraded by investment company KeyBanc Capital Markets over fears of stalled growth due to lower attendance at its Disney World and Disneyland theme parks and lower streaming viewership.
“While Disney appears less expensive versus its historical average, we believe the stock is unlikely to work until a number of items have line of sight to being resolved,” analyst Brandon Nispel wrote, reported Barron’s.
KeyBanc analysts reduced Disney’s rating from overweight to sector weight, coming as the firm carried out more layoffs at ESPN. The company, which also owns ABC News, announced layoffs earlier this year.
In a note, Nispel made reference to several areas of concern for Disney, including stalling direct-to-consumer subscriber growth, sagging content sales, a “materially harder” plan for ESPN to migrate to streaming, and fears that its U.S. theme park visits may stagnate.
“We prefer to step aside, acknowledging meaningful uncertainty, and wait for further catalysts, as buying the dip has been a losing trade,” he wrote to clients, adding that there is “more negative than positive [near-term] catalysts.”
Nispel also predicted that Disney will see a “deceleration of revenue” between the third and fourth quarter, according to reports. That comes in contrasts made by executives at Disney, who have been bullish on revenue this year.
As of Wednesday, Disney’s stock stood at about $89. Even after it brought back CEO Bob Iger in recent months, the company’s stock remains far below its early 2021 peak of $200 per share.
While Mr. Nispel and many other analysts have made no mention of Disney having waded into social issues, some consumers and conservative influencers last year called for a boycott of the multinational media corporation after it publicly opposed a Florida Legislature-passed law that would prohibit teachers from instructing young children on issues like transgender issues and sexuality.
Meanwhile, Florida. Gov. Ron DeSantis ended a decades-long deal allowing Disney World to govern its vast Central Florida resort by itself. The GOP governor has explained that the action was aimed at holding Disney accountable.
“The corporate kingdom finally comes to an end,” he proclaimed in February. “There’s a new sheriff in town, and accountability will be the order of the day.”
Last month, Disney’s chief diversity officer, Latondra Newton, reportedly departed the company. Notably, Newton was criticized in 2022 after she confirmed that Disney World would no longer use “ladies and gentlemen, boys and girls” for its fireworks display.
“We want to create that magical moment with our cast members, with our guests,” Ms. Newton said at the time in making the announcement. “And we don’t want to just assume because someone might be in, our interpretation, may be presenting as female that they may not want to be ‘princess.’”
A poll last month found that Disney’s reputation has suffered in recent months. Disney was ranked in an Axios and Harris Poll as the fifth-most polarizing company in the U.S.
Layoffs
In an announcement this year, Mr. Iger confirmed that Disney will slash about 7,000 jobs to cut costs. As part of that effort, ESPN last week announced that it will part ways with some major, on-air talent.
“Given the current environment, ESPN has determined it necessary to identify some additional cost savings in the area of public-facing commentator salaries, and that process has begun,” ESPN said in a announcement on June 30. “This exercise will include a small group of job cuts in the short-term and an ongoing focus on managing costs when we negotiate individual contract renewals in the months ahead.”
The sports channel also said the cuts are “an extremely challenging process, involving individuals who have had tremendous impact on our company,” adding, “These difficult decisions, based more on overall efficiency than merit, will help us meet our financial targets and ensure future growth.”
ESPN’s top NBA color commentator, former New York Knicks head coach Jeff Van Gundy, is also leaving the channel, according to reports. Unconfirmed reports also said that former NBA player-turned-commentator Jalen Rose, former NFL star Keyshawn Johnson, and former quarterback Steve Young were also among those who were laid off Friday.
Suzy Kolber, a longtime ESPN host, wrote on Twitter that she is among those who were terminated. “Today I join the many hard-working colleagues who have been laid off,” Mrs. Kolber wrote, posting a photo of herself. “Heartbreaking-but 27 years at ESPN was a good run.”
The sports network also canceled its national morning radio show with Max Kellerman, Jay Williams, and Johnson, the New York Post reported, citing anonymous sources.
Other top ESPN personalities have indicated that they may get the axe. Stephen A. Smith, who has been with ESPN since 2003, suggested that regarding the layoffs, “this ain’t the end” and “more [are] coming.”
“And yes ladies and gentlemen, I could be next,” Mr. Smith said during his radio program this week.
