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Disney Stock Slides 3% As Analysts Warn Of Subscriber Slowdown

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Shares of streaming and entertainment giant Walt Disney fell 3% on Monday morning after analysts at Barclays downgraded the stock, warning that the company’s long-term subscriber goals appear overly optimistic.

Key Facts

After trading largely flat last week, Disney’s stock was down by around 3% as of 11 a.m. ET on Monday, trading at just above $171 per share. 

In a note to clients, Barclays analyst Kannan Venkateshwar slashed earnings estimates for Disney, downgrading the stock from an outperform to an equal weight rating as he lowered his price target from $210 per share to $175 per share.

Disney reported that as of July it had 116 million subscribers for Disney+ and its international arm, Hotstar, with more than 57 million combined subscribers for Hulu and ESPN+. 

While the streaming giant expects to have around 250 million total subscribers by 2024, Barclays analysts are skeptical, pointing to slowing growth and the fact Disney+ has been producing far less new content than its chief competitor, Netflix.

The company’s Hotstar service in India could also take a hit as it faces expiring sports rights to cricket, the most popular sport in that country, Barclays wrote.

Key Background

Although shares of Disney are up nearly 40% over the past year, the stock has struggled in recent months. Since peaking at over $200 per share in mid-March, shares have pulled back by around 15% and are largely trading sideways.

Crucial Quote

“The roll out of Disney+ has been the most successful streaming launch ever, which is remarkable given that the company achieved this with very little new content,” Barclays analysts said. “This year however, Disney+ growth has slowed significantly… In order to get to its long-term streaming subscription guide, Disney needs to more than double its current pace of growth to at least the same level as Netflix.”

Tangent

Shares of Disney rose as much as 3% last Friday, after a report said the company was considering a spinoff of its ESPN sports channels. The stock pared back some of its gains shortly after, when a source “close to the situation” told CNBC that the report was “inaccurate” and that Disney was actively looking to pursue further value through ESPN+ and sports betting.

What To Watch For

After boasting 209 million subscribers in July, Netflix reports its third-quarter earnings on October 19. The streaming service forecasts that it will reach over 212 million subscribers this quarter, though some analysts predict that the worldwide success of popular show Squid Game can help Netflix beat subscriber estimates.



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