Disney’s stock was downgraded this week by investment advisory company KeyBanc Capital Markets over fears of stalled growth at its Disney+ and Hulu streaming services and lower attendance at its theme parks, according to reports.
"While Disney appears less expensive versus its historical average, we believe the stock is unlikely to work until a number of items have line of sight to being resolved," analysts led by Brandon Nispel said on Wednesday, according to Barron’s.
KeyBanc analysts lowered Disney’s rating from overweight to sector weight Wednesday, causing its stock price to fall.
The analysts' main concerns included the slow growth of subscribers to Disney+ and Hulu, a possibly too-high price for the new ESPN streaming service, weak theme park attendance compared to company expectations, the company being too ambitious about content distribution profits and shares dropping last year with a similar financial setup this year, the outlet reported.
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Since its peak of nearly $200 in late 2021, Disney’s stock has fallen sharply, ending Friday at $89.28.
"We prefer to step aside, acknowledging meaningful uncertainty, and wait for further catalysts, as buying the dip has been a losing trade," Nispel said in a client note Wednesday, according to CNBC.
KeyBanc noted that Disney would likely have to raise prices for current Disney+ and Hulu customers and devise strategies to retain those same customers such as a tiered system for those wanting to pay less.
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Theatrical releases like "The Little Mermaid" also face smaller audiences at theaters, the analysts said, according to CNBC.
The analysts also noted that while demand for sports on cable TV remains high, customers aren’t showing the same willingness to pay for an ESPN streaming service just yet, according to CNBC.
Higher theme park attendance at Disneyland during its 100th Anniversary celebration this year was also seen as a "contraction" compared to the attendance at Disney World’s 50th Anniversary celebration from 2021 to earlier this year, and KeyBanc said those realities weren’t included in the company's expectations for the parks.
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Nispel predicted a "deceleration of revenue" between the third and fourth quarter despite Disney’s bullish expectations.
Fox Business has reached out to Disney for comment.
