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Walt Disney Co. continues to give Macquarie analyst Tim Nollen new reasons to worry.
The entertainment giant is in the midst of a cost-cutting push, but that can only help so much, according to Nollen. His list of “concerning” revenue trends is growing, and he thinks those dynamics could weigh on Disney’s
DIS,
narrative going forward.
Nollen downgraded Disney’s stock to neutral from outperform back in May, citing a litany of concerns, some of which seemed to get at the core of Disney’s identity. For example, Nollen flagged that Disney will have a rough road ahead once it inevitability tries to turn ESPN into a standalone streaming service.
But there are also some near-term revenue trends that have him feeling nervous. Nollen had already anticipated a slowdown in parks growth but has now highlighted a Wall Street Journal report indicating that Walt Disney World had one of its slowest July 4 weekends in almost a decade.
The parks dynamic is “potentially worrisome” for the current quarter, Nollen wrote. While the July 4 period won’t affect the results Disney is due to report Aug. 9, “it may represent similarly softening trends before that,” he said.
Additionally, he flagged weak box-office performance after “Elemental” struggled and the new “Indiana Jones” movie logged only a “modest” debut.
“Content production is now halted due to the WGA [writers’] and SAG-AFTRA [actors’] strikes, threatening production plans until resolved,” he wrote.
Disney also faces challenges in legacy media, as “extensive cord cutting” weighs on the company’s traditional pay-television business.
See more: 2.3 million Americans ditched pay TV services in the first quarter
“Linear TV ad sales do not appear to be improving in the U.S. or internationally, and ABC saw one fewer NBA Finals game this year vs. last,” Nollen said in his latest report.
Read: Disney’s Bob Iger says traditional TV is near ‘obsolescence’ — and teases possible asset sale
The company’s expense-reduction efforts could offer a cushion to profits, in his view, “but these top-line issues are concerning.” The company is also without its longtime chief financial officer, Christine McCarthy, who was “well-regarded” but announced an unexpected leave of absence in June.
“Perhaps this explains why CEO Bob Iger’s two-year term has now been extended through 2026, but it again raises questions about succession planning at Disney,” Nollen said as he cut his price target on Disney’s stock to $94 from $103.
Opinion: Bob Iger’s repairs at Disney’s crumbling castle need more time
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