Citigroup Downgrades Disney Stock on Theme Park Concerns

Citing negative economic trends fueled by increased energy costs, reduced consumer spending and the faltering housing market, Citigroup downgraded its opinion on Walt Disney Company stock from "hold" to "sell."

Disney shares dropped 1.9% on the news and were trading at $28.80 at market close.

Citigroup analyst Jason Bazinet noted while there was nothing fundamentally wrong with how Disney conducted business, "Disney's strategy and strong execution may simply get overshadowed by macroeconomic forces. That is, as energy costs remain stubbornly high, the housing market falters, and equity values pull back, we think it's only natural for consumer spending to slow."

In a response rarely made by companies following analyst reports, Disney CFO Thomas Stagg said in a prepared statement, "Thus far, we are pleased with the pace of business at our parks, especially given the fact that we had record attendance at our domestic parks last year."

Source: MarketWatch

I believe Bazinet said the same thing last year or 2 years ago and he was totally wrong then. I guess if you keep saying the same thing over and over it will eventually become true.

With the stock in the high $20's it is really the time to buy.

not only that, but wouldnt we have heard something on the news(unless there was and I missed it) from either Staggs, or Iger about the situation?

This is just another case of an investment group wanting to flex it's muscles so it can see how important it is.

"See? We made the stock price move just by making a wild prediction."

Investment groups are a finicky bunch and sometimes weild way too much influence on stocks.

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Originally Posted by disneyfan07

not only that, but wouldnt we have heard something on the news(unless there was and I missed it) from either Staggs, or Iger about the situation?

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Staggs has addressed this and the Disney stock has been upgraded to 'buy.'

Source: Forbes

And, these usually cause an overreaction, and, in this case, it is very short-term, time-wise.
I mean, when the dollar drops, it becomes cheaper for foreigners to come here to visit. So, where will they visit?
And, recessions don't last forever, and DIS isn't leveraged to the hilt.

I think Citigroup failed to acknowledge that the entire stock market took a plunge....it wasn't just Disney. I love how they say that "Well, Disney isn't really doing anything wrong, but we think they're going to fail, anyways." What a weird prediction.

All of the above, plus the fact that the Attractions Industry as a whole is much less predictable than other markets... there have been many cases where the gurus have predicted low entertainment spending due to less "expendable income," when the opposite has happened (hey, stressed-out people need to splurge on a break now and then).

And let's not forget the impending tax rebates. While not fortunes by any means, these will offset a lot of vacation costs that families normally couldn't have handled. Just in time for summer...

A recession might actually be good for Disneyland. People who might otherwise have traveled outside of California are more likely to stay home and just take the kids to Disneyland instead. With Toy Story Midway Mania opening in the Spring along with a new parade, Disneyland Resort is looking toward a big year.

A recession might soften things for Florida, but unless it is a deep depression, it shouldn't be too bad. The weak dollar will encourage foreigners to travel to the US, but a pull back in domestic travel will likely bring attendance down a bit. But I doubt that it is anything for Disney to worry about yet.

If the recession lasts over a year or the job market crashes, then all bets are off.

It may well be that the downgrade has more to do with how the WGA and probable SAG strikes will effect the studioside of the business. Not only does Disney produce a whole raft of shows and movies, but it has a large property rental and craft services business as well. Also depending on how well Disney has been doing at buying currency protection instruments the continual weak dollar could have a large effect of Disney.

What I find funny is that Disney's stock has gone up $4 since Citigroup "downgraded" its status. That must do wonders for Citigroup's reputation. <_<

They must be, as Liberace once said, crying all the way to the bank.

after listening to that shareholder meeting with its lack of exciting news and plants in the audiance during the Q & A...I would downgrade disney stock too.

I mean look we got an economic recession beginning that will not only affect the U.S. but soon the world too. We have Harry Potter land opening at Universal Florida within the next 3 years and the tourist market in general is becoming increasingly competive for your money. So what does disney do to counter?

Cheap marketing schemes and lame cartoon tie-ins.

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Originally Posted by sediment

I mean, when the dollar drops, it becomes cheaper for foreigners to come here to visit.

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"When the dollar drops"? In case you haven't noticed, it's been in mid-plummet for several years now and shows no signs of slowing down.

2004:
http://www.pbs.org/newshour/bb/econo...llar_12-2.html
http://www.ecommercetimes.com/story/38826.html
http://nymag.com/nymetro/news/bizfin...tomline/10657/
http://www.npr.org/templates/story/s...toryId=4186041

2005:
http://www.mises.org/story/1759
http://www.inthesetimes.com/article/1879/

2006:
http://news.bbc.co.uk/2/hi/business/4772049.stm
http://money.cnn.com/2006/12/01/news...tune/index.htm

2007:
http://www.msnbc.msn.com/id/18383804/
http://www.csmonitor.com/2007/0924/p01s05-usec.html
http://news.bbc.co.uk/2/hi/business/6291090.stm
http://www.alternet.org/workplace/67307/
http://weblogs.chicagotribune.com/ne...enback_ha.html
http://money.cnn.com/2007/09/21/mark...llar/index.htm
http://www.washingtonpost.com/wp-dyn...111201075.html
http://www.nytimes.com/2007/12/02/business/02view.html

2008:
http://www.currencytrading.net/2008/...alling-dollar/
http://www.businessweek.com/globalbi...310_608242.htm

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Originally Posted by sediment

So, where will they visit?

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If they're Europeans, they could visit Disneyland Paris. If they're Japanese, they could visit Tokyo Disneyland. If they're Chinese, they could visit Hong Kong Disneyland. Or, if they're from other countries, they could visit any of those 3 other non-U.S. Disney parks.

Or, they could avoid theme parks altogether. If Disney really wanted to hedge its bets the theme park division would buy the Hilton Hotel chain (but that's not going to happen).