Disney Analyst Predicts Larger Long Term Impact Than Expected As a Result of COVID Shutdown
According to a piece released today by The Hollywood Reporter, Analyst, Richard Greenfield from LightShed Partners released a report yesterday highlighting that “Disney’s Unique Vulnerability to COVID-19 Should Keep Investors Away.”
Greenfield feels that Disney’s stock which closed above $106 on Tuesday is not the best investment given that before the COVID-19 crisis on November 27, 2019 it was coming in at nearly $151.58 a share. He said “With Disney trading at 48 times 2021 earnings per share and 28 times fiscal 2022 earnings per share, with both estimates potentially aggressive at this point, we are hard-pressed to see why anyone needs to own Disney shares here.”
Greenfield argued that the longterm impact of the COVID-19 closures might be greater than analysts originally considered. He said, “While Disney’s theme park will hopefully get back to normalized levels at some point, predicting that timeframe is nearly impossible and in the interim, Disney’s media network businesses will worsen considerably.”
Unlike other analysts who hail the success of Disney+ streaming service as a key weapon in Disney’s ability to bounceback post COVID-19, Greenfield doesn’t necessarily agree. He said in his report, “The early success of Disney+ enabled investors to see a Netflix-like way for Disney to monetize their incredible array of content.” Greenfield added, “Disney was able to shift the narrative from the many challenges facing their legacy assets (which plague not just Disney, but the entire media industry) to a rocketship called SVOD and best of all, Disney convinced investors to overlook the reality that as that SVOD rocketship accelerated, it accelerated the demise of Disney’s core profit centers.”
Greenfield then went on to highlight, “Investors convinced themselves that Disney should trade at over 25 times earnings because earnings were understated by their SVOD investment, which never made any sense to us given aforementioned impact SVOD would have on their legacy assets. And then COVID-19 arrived and that debate became irrelevant.”
In conclusion, Greenfield acknowledged that the global pandemic will have a negative impact on all traditional media and entertainment companies because advertising is collapsing and also because film production has essentially stopped since the outbreak. Also, sports are taking a time-out due to social distancing and like the theme parks, no one really knows when sporting events will return.
Unlike other analysts, Greenfield doesn’t necessarily see Disney’s ability to monetize its intellectual property across so many different aspects as a positive thing. He actually thinks it becomes a vulnerability during COVID-19. He adds, “This vulnerability means that Disney’s earnings power will be significantly reduced from how investors think about normalized earnings.”
All of these details culminate in a prediction that Disney earnings are likely to be lower than investors originally anticipated. Greenfield is forecasting fiscal year 2020 earnings (per share) at $2.10 followed by 2021 earnings of $2.22 per share and 2022 earnings of $3.81 a share.
This differs from other reports from Wall Street Analysts that we’ve covered so it remains to be seen how things will pan out. Readers are encouraged to keep following along with MickeyBlog for the latest Disney-related news and updates.
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Source The Hollywood Reporter