Disney stock just got downgraded at Wolfe Research: find out more

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on May 12, 2023
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  • Wolf Research analyst suspended his price target on Walt Disney Co today.
  • Peter Supino expects its DTC segment to be slow in reaching profitability.
  • Disney stock is down roughly 20% versus its year-to-date high at writing.

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Walt Disney Co (NYSE: DIS) is in focus this morning after a Wolfe Research analyst turned dovish on the entertainment conglomerate.

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Disney+ lost 4.0 million subscribers in Q2

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On Friday, Peter Supino downgraded the California-based company to “peer perform” and suspended his price objective on the stock.

His view is based primarily on the company’s direct-to-consumer business that the analyst warns will be slow in reaching profitability.

The DTC subscriber and linear TV outlooks keep deteriorating. DTC plan for > subs, > prices and < cost seems like cognitive dissonance.

Earlier this week, the mass media company said its flagship streaming service lost 4.0 million subscribers in the second financial quarter (read more). Consequently, Disney stock lost more than 10% in recent sessions and is now down about 20% versus its year-to-date high.

Why else did he turn dovish on Disney stock?

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Disney could also take a hit if the U.S. economy slides into a recession that tends to hit advertising.

Supino turned dovish on Disney stock as he expects cutting promotional and SG&A expenses to be a headwind for the direct-to-consumer business in terms of gross additions. His research note reads:

Today’s late cycle consumer environment and deteriorating direct-to-consumer and linear revenue growth leave us more concerned about forecasting risk and time decay.

To that end, he’s not entirely convinced that Disney’s plans of raising prices later this year will be a good idea. Also this week, CEO Bob Iger confirmed that Hulu content will soon be added to the Disney+ streaming app.

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